Zero Depreciation Car Insurance
What is Depreciation?
Simply it means the reduction in the value of an asset. Taking car insurance, depreciation is the consistent decline in the value of your car’s components arises from age, usage, normal wear, and tear, etc. Therefore, the depreciation accumulated on your car is directly proportional to its age.
In India, the depreciation rate for all vehicles is decided by the norms issued by Insurance Regulatory and Development Authority of India (IRDAI). Here is a table displaying the depreciation that gets accumulated on your car every year.
Age of Car Percentage of Depreciation 0 to 6 months 5% 6 months to 1 year 15% 1 year to 2 years 20% 2 years to 3 years 30% 3 years to 4 years 40% 4 years to 5 years 50%
After knowing meaning of depreciation, let us see:
What is Zero Depreciation car insurance?
- It is a car insurance add-on cover that negates the impact of depreciation in your car insurance policy.
- In a Zero Depreciation Cover, there is no effect of depreciation on your car insurance plan; hence, you can receive the entire value of your car’s components during a car insurance claim without any deductions for depreciation.
- Therefore, adding a Zero Depreciation Cover enhances the coverage of your car insurance plan and increases the financial protection for your vehicle.
- So, if you have a Zero Depreciation Cover, you can claim the entire amount of the damaged components of your car in your car insurance claim.
Benefits of Zero Depreciation Car Insurance Add-on Cover
- Increase in Coverage: Adding a zero depreciation cover to your car insurance plan leads to an enhancement in the overall coverage. If you have precious and luxury car, a zero-depreciation cover is beneficial.
- Higher Claim Amount: You can claim the total repair/replacement cost of the various insured parts of your car.
- Lower Pocket Expenses: If you do not have a zero depreciation cover, your car insurance claim amount will be determined after the deduction of the depreciation accumulated on your car’s components. This could mean that a significant proportion of the repair/replacement expenses may have to be borne by you. However, with a zero-depreciation cover, you do not have to worry about the depreciation of your car’s components.
- Nominal Additional Cost: A Zero Depreciation Cover adds only a nominal additional cost to your car insurance plan but adds substantial benefits to your car insurance coverage.
- Stress free: It offers stress free mind to car owner.
How is Depreciation Calculated?
It is represented in following table.
Car Components Rate of Depreciation Rubber, Plastic, and Nylon Parts; Batteries 50% Fibre Parts 30% Wooden Parts 5% in the first year and 10% in the second year
Factors Affecting Zero Depreciation Car Insurance Premium
- Age of Car:The vehicle depreciation rate is directly proportional to the vehicle’s age.
- Make and Model of Car:The make and model of your car are instrumental in the determination of its Insured Declared Value. The higher the IDV of your car, the higher is your car insurance premium and the premium of your zero-depreciation car insurance cover.
- Where you drive the car:The geographical location where you usually drive your car is an important factor in the calculation of your car insurance premium. If you live in a place with a low incidence of traffic, your car insurance premium and the premium for your zero-depreciation cover are likely to be lower than for someone who lives in a high-traffic area.
See also….
Zero Depreciation Insurance vs Comprehensive Car Insurance
What is Comprehensive Insurance
Comprehensive Insurance vs Third Party Insurance