Every car owner in India knows that it is mandatory to get their car insured under the Motor Vehicle Act, 1988. Additionally, you may opt for add-on covers like personal accident cover, hydrostatic lock cover among others. But you may be unaware about the existence of a Zero Depreciation Insurance Policy that can actually make life easier.
What Is Zero Depreciation Rate In Car Insurance?
Whenever you file an insurance claim, your car insurer has to ascertain the amount that is payable. This is done via a formula that takes into account certain factors like depreciation, because of which you have to pay up a hefty fraction of the overall costs.
To circumvent this additional financial burden, it makes sense to buy a zero depreciation cover. It basically promises comprehensive coverage without factoring in depreciation. In other words, if your car is damaged in an accident and you file a claim, the insurer will cover the entire cost. A mandatory policy excess has to be paid while buying this.
Generally, zero depreciation is more applicable on new cars. However, some insurance companies may not necessarily cover normal wear and tear and mechanical breakdown, which means there may not be 100% coverage. Every customer who has taken a zero depreciation cover has to pay a mandatory policy excess. This is known as compulsory excess. There is also a restriction on the number of claims you can make depending on the cover you buy.
• Depending on the type of policy that you choose, you can claim 100% settlement of the cost of the vehicle’s repairs, without taking into consideration the depreciation factor.
• A comprehensive car insurance cover does not allow claim for damages incurred to glass, plastic, nylon, fibre, etc. parts of the vehicle. But a zero depreciation policy pays for these.
• You may have to pay a higher premium for a zero depreciation policy as compared to a conventional policy. But its value for money, considered a lot of things are covered under zero depreciation which a normal car insurance policy will not cover.
• Peace of mind is guaranteed.
The depreciation rates taken into account vary from one insurance company to another. It’s important to know that certain parts of the car age faster than the others, thus escalating the depreciation value. Hence different depreciation rates are applied for each part depending on these factors. This explains why rubber / plastic parts, tyres / tubes, battery etc. are susceptible to maximum amount of wear and tear. Hence, the depreciation rates applied on them are usually higher compared to other parts like fibre glass, etc. The depreciation of metallic parts is based on the age of the vehicle.
While buying any insurance policy always read the fine print and compare existing policies --premium, benefits, disadvantages, sops, terms and conditions--to see what suits your needs the best. It's always best to buy an insurance policy online as it saves time, is cost effective & is a transparent option.