What Is Zero Depreciation Car Insurance?

by IndianAuto Team | 03/08/2020
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Do you know that car insurance companies often pay less than the repairing cost because your car loses value? Opt for a zero depreciation car insurance to earn more!

The loss in value of automobiles due to time is known as depreciation. To be more specific, every asset wears out after a period of time, and no car’s component has a permanent value. Therefore, older cars will cost cheaper than newer cars. Moreover, the way a driver uses his/her car also plays an important role on the level of depreciation. That’s why many tips advise you to keep your car well-maintained. No matter how good the materials are, plastic, metal, and glass do wear out over time, which makes the cars lose their value gradually. There are other factors that lead to depreciation in cars; however, the above-mentioned reason is the most common.

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Because of the depreciation, when your car gets damaged in an accident, there’s a great chance that you cannot recover all the expense of the replacement. That is mainly because insurance companies only pay the price after considering the depreciation of the damaged parts while you have to pay for totally new parts which obviously cost higher. Fortunately, there’s a way that helps recover more. That is taking advantage of the zero depreciation car insurance. By availing this insurance policy, you can get a maximum compensation during the time of an insurance claim.

What is the benefit of zero depreciation car insurance?

1. The people who benefit most from zero depreciation car insurance?

It is widely believed that new or inexperienced car drivers should opt for zero depreciation car insurance as they tend to get their car damaged. However, many experienced drivers also can get in accidents because of others’ faults. Therefore, zero depreciation can be opted by anyone, it is your decision to use or not. Besides, there are a lot of other reasons to purchase a zero depreciation car insurance in India:

  • When you buy a new car.

  • When your new car is a luxury one, and the spare parts are too expensive.

  • (In)experienced drivers should opt for this to protect their cars (mentioned earlier).

  • When you are living in an area that has many car accidents per year.

  • When you worry too much about dents and bumps.

  • When expensive car parts are a nightmare to you.

car value

Get a maximum compensation with zero depreciation car insurance.

2. The benefit you can get from zero depreciation car insurance

As stated earlier in this article, with normal insurance, you cannot get a full recovery of your damaged car because the received compensation will be calculated after deducting the lost value of your car. Although it is not impossible to afford the entire cost with the help of such compensation, some people, whose cars’ parts can cost very high, will find paying the cost is truly an unbearable burden.  

Car insurance with zero depreciation policy can help drivers fetch more than a standard compensation, even 100% in some cases. Note that, in most cases, zero depreciation won’t help you pay the entire replacement cost, but it will greatly help you save money on the cost compared to a normal car insurance. Because of this benefit, it is advised that everyone should opt for a zero depreciation car insurance for the unforeseen unexpected events.

car depreciation

Your car will lose its value over time.

Zero depreciation car insurance policy

1. You must opt for a zero depreciation car insurance policy

To have the premium benefit of zero depreciation car insurance, you must, obviously, opt for it. Note that this does not change anything in the Claim Settlement, but it only increases the amount of compensation you earn. In standard car insurance, you will have to pay more for the replacement cost. However, the policy may be different between places and models.

2. Zero depreciation car insurance covers more

The repairing cost of glass, fibre, plastic or rubber parts is borne by the insurer in standard car insurance. On the other hand, the cost is paid by the insurance company if the insurer opted for zero depreciation car insurance.

3. The longer you use your car, the chance of deducting the lost value increases

A zero depreciation car insurance can cover up to 100% of compensation for a new car. Normally, you can get 0% depreciation if you use a car in just 6 months. Undoubtedly, the compensation percentage will reduce correspondingly to the age of a car.

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Briefly to say, in order to determine how much compensation you can get from a zero depreciation car insurance, you need to consider 3 key factors:

  • The lifespan of your car: the longer, the lesser compensation. Most of the time, you can get 100% of compensation if your car is just 6 months used.

  • A car model: different car models may have different zero depreciation policies.

  • Location: where you buy your car can also affect the policy.

materials in a car

Do you know that your car is made of many materials?

There’s another thing that you may need to know. The IRDA defined depreciation for the car parts as followed:

  • 50% depreciation deduction on plastic/nylon/rubber parts, and batteries

  • 30% depreciation deduction on fibre/glass parts

  • Depending on the age of a car, the wooden parts’ depreciation shall be deducted as 5% (1st year), 10% (2nd year), and so on.

Verdict

To sum up, your car loses its value as time goes by, so, as a matter of fact, insurance companies will deduct the depreciation when they pay for your replacement/repair costs when you claim insurance. To have more compensation, you need to opt for a zero depreciation car insurance, which is recommended for everyone. You can get up to 100% of compensation with zero depreciation car insurance depending on where you buy your car, how long you use it, and which model it is.

You may not want to choose a zero depreciation car insurance because you think that you won’t be in a severe accident. However, remember that many things happen when we least expect them. An extra cost on zero depreciation car insurance will help you save a huge amount of money when your car is damaged from an accident. Besides, purchasing this premium insurance is not the only tip to save money, check out our website to learn more about other related helpful tips.

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