Zero Depreciation Cover: Coverage & Benefits

Updated: 01-11-2019 07:30:45 AM

Depreciation refers to the loss in the value of an asset over the time. Motor vehicles are called depreciating assets as their value decreases with time due to reasons like age, general wear and tear, etc. Parts of the car are made up of different items like metal, glass, plastic, etc., and each has a different rate of depreciation.

At the time of filing a claim, the insurance company factors in depreciation value of the vehicle to calculate the amount payable. Thus, it makes sense to opt for a zero depreciation cover for your two-wheeler/car to get the maximum claim amount.

What is Zero Depreciation Cover?

Zero depreciation also known as nil depreciation is an add-on cover or an additional benefit that you can avail along with your comprehensive two-wheeler/car insurance policy. You need to pay extra amount to enjoy this benefit. On availing this coverage, the insurance company keeps out the depreciation factor while calculating the claim amount, thus, giving maximum coverage to the policyholder. This means in the event of an accident, no depreciation amount will be deducted from the coverage of your insurance policy.

Why Consider Taking Zero Depreciation Cover?

The depreciation amount deducted on parts and materials, such as rubber, plastic, fibre, is quite a lot, with maximum being 50%. In the event of an accident, the policyholder won’t be able to recover the entire amount incurred on replacement of the parts, if the insurer pays after deducting the depreciation amount. The insured has to pay the difference between the market value of the new part and depreciated part of the two-wheeler/car. However, if you have a zero depreciation cover, you would get the maximum sum insured while making claim requests because the depreciation part will not be considered.

Who Should Opt for this Add-on Cover?

The premium for nil depreciation cover with comprehensive two-wheeler/car is comparatively higher compared to the standard motor insurance policy. However, it makes complete sense to pay a higher premium if you own a luxury car, just bought a new car or live in an accident-prone area.

Coverage under Nil Depreciation Cover

This cover is valid for both new and old one vehicles, with maximum age up to 3-5 years.

• It offers coverage on all fibre, rubber, plastic and metal parts without deducting depreciation
• This benefit can be availed only twice during the policy term

Exclusions

Exclusions are cases not covered by the insurance plan. The insurance company is not liable to pay for the claims filed by the policyholder due to the following reasons:

• Damage caused due to an uninsured peril
• Normal wear and tear
• Engine damage due to water ingression
• Damage due to oil leakage
• Mechanical breakdown

Important Aspects

There are certain aspects which you should know about zero depreciation cover.

• Zero depreciation comes with a limit on the number of claims policyholder can make in a year. So, refrain for using this cover for minor cases
• Check the inclusions and exclusions before opting for a zero depreciation cover
• If you own a luxury car or live in an accident-prone area, you should definitely consider buying a zero depreciation cover
• You cannot avail this benefit if your vehicle is damaged beyond repair or is declared as a total loss

Advantages of Buying Zero Depreciation Cover

Following are the benefits of opting for zero depreciation cover:

• Policyholder gets the actual claim amount after deducting compulsory deductible
• Offers enhanced coverage on your motor insurance existing policy
• Expenses incurred due to repair/replacement of insured parts will be settled without taking depreciation factor into consideration. Thus, reducing your expenses to almost zero
• It protects you from paying high cost at the time of claim settlement

 FAQs

Q1. Should I opt for zero depreciation cover?

If your vehicle has expensive spare parts then you should certainly opt for zero depreciation cover. In case of an accident, damage to these spare parts might cause a hole in your pocket. Hence, having a nil depreciation cover will help you to save money and minimise the out of pocket expenses at the time of claim settlement.

Q2. How can I avail this add-on coverage?

Policyholders can choose this add-on cover while purchasing the basic motor insurance. The insurance company will calculate the premium payable based on the vehicle’s model, age of the vehicle and the location you are based out of. In case your vehicle is more than 5 years old, your request for this add-on will not be entertained. You need to pay extra amount for this coverage.

Q3. Does it cover damage to tyres?

No, zero depreciation cover doesn’t cover standard wear and tear to your vehicle and its parts, such as tyres, clutch plates, etc.

Q4. What factors affect the premium of nil depreciation cover?

The premium you pay towards this cover is based on the following factors:

• Make and model of the vehicle
• City where you live