What Is Zero Dep Insurance?
Posted on Feb, 2020
What is Zero Dep Insurance?Car insurance is an incredible service that comes to your aid when you find yourself in a road accident. If you buy the right insurance policy, you can also get coverage against car damage or loss of your vehicle, owing to natural and human-made disasters. You have to file an insurance claim after which the insurance provider determines the compensation sum to be given to you. There are complicated calculations and insurance terms that are considered while determining the insurance amount payable to you, one of which is zero depreciation. Here’s everything you ought to know about it.
Zero dep car insurance – meaning and definitionZero depreciation car insurance rider is one of the many add-on riders that you can buy when you purchase a comprehensive car insurance policy. This is a unique cover which helps you protect your car against various kinds of physical damages endured by it. If you opt for the zero-dep cover, the insurance provider does not factor the depreciation element, when you file an insurance claim. Unlike a basic insurance policy, in which the insurer calculates the cost of depreciation; you become eligible for the entire compensation amount if you choose the zero-dep cover. You can purchase this cover as an add-on when you buy a new vehicle or add it to your insurance policy during renewal.
Benefits of choosing the zero-depreciation rider
There are four significant benefits you can enjoy by adding the zero-car dep insurance cover to your car insurance policy. They are as under:
- The rider helps reduce your out-of-pocket expenses when you file an insurance claim since the cost of depreciation is not considered
- In case you file an insurance claim for specific parts of the vehicle (for instance the windscreen or the engine); the claim is settled without calculating the part’s depreciating value
- You can be completely stress-free while filing an insurance claim if you have the zero-depreciation cover add-on rider.
- The cover also adds value to your basic car insurance policy, thus rendering your investment fruitful.
3 things you should consider before adding the zero-dep insurance to your insurance policy
The age of your vehicleYou can buy the zero depreciation cover only if the age of your vehicle is less than 3 years, depending upon the insurance company’s terms and conditions. Typically, most insurance providers allow you to buy this rider only when you purchase a new car.
The premium amountThe premium amount payable against your car insurance policy can significantly increase if you opt for zero depreciation car insurance cover, because of the kind of coverage provided. Factors that determine the zero-dep premium amount include the make and model of the vehicle, its age and the area in which you live (whether it is a high-risk or theft-prone area).
The number of claimsThe number of claims you can file if you have a zero-dep insurance cover is limited. Typically, it is recommended that you don’t file claims for small dents and scratches. Note that when you file an insurance claim, the insurance provider only reimburses you for the depreciated value of the parts of the vehicle that are replaced. The rate of depreciation is determined, not by the insurance company, but by the Insurance Regulatory and Development Authority of India (IRDA). It is as under:
- 50% deduction is applicable on nylon, rubber and plastic parts and vehicle batteries
- 50% deduction is applicable on fibreglass components
- Depreciation is deduction according to the vehicle’s age on metal parts
Who should purchase a zero-depreciation cover?Having explained zero depreciation meaning, let’s take a look at who is the ideal audience for this add-on rider. The following group of people can benefit from purchasing a zero-dep cover:
- People living in flood-prone areas
- People who own luxury cars
- New or inexperienced drivers
- People living in accident-prone areas
- People who have purchased new cars