What is Zero Depreciation Insurance? What are its benefits?

 

What is Zero Depreciation Insurance? What are its benefits?

In vehicle insurance, other than the core insurance policy, there is also the opportunity of adding numerous types of add on insurance. In this, Zero Depreciation Insurance prevents deduction in the amount of insurance you get. That is, it helps to receive the full amount of insurance. In this post, we will know what zero depreciation insurance for a car is and what its benefits are.

What is Zero Depreciation Insurance?

Zero depreciation insurance is such an add-on insurance, with the assistance of which, even when a vehicle grows old, one obtains entire insurance. Actually, in case of damage to the automobile or any other vehicle in an accident, you submit an insurance claim. However, the insurance provider does not give you the entire cost of your vehicle. Rather, it is lowered according to the age of the vehicle. Because the amount of depreciation is subtracted from the overall worth of your car.

Actually, the older the car becomes, the smaller the insurance premium for it. Whereas, the newer the car, the larger the sum insured. This arises due to depreciation in the value of the car with the passage of time. However, if you also purchased zero depreciation insurance for your car, your sum promised in the insurance policy is never underpaid. Rather, the complete cost is paid when the vehicle or one of its pieces is damaged.

This coverage is provided as a kind of add-on with comprehensive insurance. It is also known as Zero Dep Cover or Zero Dep Insurance.

Anuj Rawat, for instance, just purchased a vehicle for Rs.10 lakh. He purchased auto insurance for his vehicle and initially paid a premium of Rs.15,000. After a year, that car's market value drops to Rs.9 lakh. Additionally, his insurance costs also are reduced to Rs.12000.

This occurs, and as time goes on the market value of the automobile decreases. Additionally, his insurance becomes less expensive. Similar to how the amount obtained as insurance lowers in the case of an accident. However, if you purchased zero depreciation insurance, you will receive the full amount of the policy.

What does the term "depreciation" mean?

Actually, the worth of any object decreases with age. Because things age with time, they start to lose their strength, develop defects, and lose their aesthetic appeal. The same is true for your car, bike, or other vehicle. It is referred to as depreciation or depreciation in financial jargon. The insurance provider lowers the amount covered for your car as a result of this depreciation when it comes time to settle the insurance claim.

This occurs when your car's value decreases as a result of depreciation. Additionally, the premium for the automobile decreases in accordance with the fixed price of the vehicle. As a result, as the value of your automobile decreases, the price of your auto insurance coverage also appears to decrease.

Who Should Select an Add-On for Zero Depreciation Coverage?

The following list of individuals should purchase the zero depreciation cover:

1.     New Car Owner –

If this is your first time purchasing a vehicle, you are more in need of zero depreciation coverage. Because a car or other vehicle's depreciation begins on the day, it is purchased. You can get rid of this insurance by subtracting the amount covered in the event that the new automobile is damaged. You receive the whole money promised if you have not purchased dep cover.

2. Drive a pricey or luxurious vehicle

If you own a high-end, sporty, or luxury vehicle, you should know that in addition to the vehicle's cost, its parts are also very pricey. Such a vehicle may be expensive to repair if it is involved in an accident. If you receive the full amount of insurance in this circumstance without having it reduced, it will be very convenient. You may acquire this facility solely with the support of zero depreciation cover.

3. If your neighbourhood is prone to accidents:

If you reside in a region where automobile accidents are more common, then it is important for you to take zero-depreciation protection. Because in these regions your automobile or vehicle also raises the possibilities of getting into an accident. Then again, if you want to collect the entire insurance claim then there must be zero-depreciation protection.

4. To new drivers

If you have learnt to drive a new automobile, then you may be more prone to argue. Then, it would be good for you to obtain a zero depreciation cover. So that in case of damage to the car, you may collect a complete insurance claim.

5. Normal Car Owners

Generally, insurance firms avoid giving zero depreciation cover for older automobiles. Because there is a high chance that they may be harmed or involved in an accident because of being uncontrolled. However, it is preferable to purchase one if your automobile receives zero depreciation coverage. Regardless of how large or little the automobile is. If it is damaged, it is difficult to cover the repair costs. There is a lot of ease if you have full insurance from the insurance provider.

How is a car's depreciation determined?

Depreciation in a car or other vehicle is calculated using the vehicle's age and its current market value (Insured Declared Value) (IDV). The depreciation of a vehicle rises with age. Insurance companies can calculate depreciation precisely by: The company assesses various automotive components in a variety of ways.

Varied materials, including tyre tubes, nylon components, batteries, airbags, fibreglass, paint, and glass parts, have different assessments of depression. After determining the total loss in the event of an accident, the insurance provider subtracts the amount of depreciation from the claim in accordance with the age of the vehicle.

Depreciation deduction rate based on the age of the vehicle.

According to the car's year of production, the depreciation is determined. This aids in calculating the insurance payout in the event that a certain component is damaged. The value of an automobile decreases as it gets older. If the entire vehicle is stolen or destroyed, the price is reduced in accordance with the table below.

The vehicle's age Depreciation rate that applies to the automobile (%)

i.              Vehicles under six months old 0%

ii.             6 to 12 months old used automobile, 5%

iii.            Between one and two years old, used automobile 10%

iv.            Between two and three years old 15%

v.             Vehicle used for three to four years 25%

vi.            Automobile that is four to five years old 35%

vii.           40% if the vehicle is five to ten years old.

viii.          50% if the vehicle is older than ten years.

Depreciation rate for automotive components. Rate of Car Parts Scarcity

If only a certain component of your car is damaged and the material of the component defines not the complete thing, the rate of depreciation for that component. View the table below.

i.              50% off all paint and painting services

ii.             50% depreciation rate for the car's rubber, nylon, plastic, and battery components

iii.            Fibreglass parts are at the rate of 30%.

iv.            The wooden components of the automobile were dated based on its age.

v.             Nil (No depreciation) for glass component damage