Zero Depreciation Car Insurance: Things to Know

Buying a comprehensive car insurance policy with a zero depreciation add-on gives you complete financial protection against repair costs. You can avoid depreciation deductions on plastic, rubber, metal and other parts during claim settlements with this add-on. While standard insurance policies deduct up to 50% depreciation on various car components, zero depreciation car insurance ensures you receive the full claim amount. The add-on is particularly useful for new and luxury vehicles, where repair costs can be huge. Most insurance companies offer this protection for cars up to 5 years old, making it an excellent investment tool for car owners who want maximum coverage against unexpected repair expenses.

Introduction

Whether it’s an SUV, a nano, or a sports car, buying a four-wheeler in itself is a huge investment.  You may have to spend a huge portion of your lifelong savings to get a car for your family. So obviously, you’d protect it from any unexpected damage or theft with a suitable car insurance. However, have you ever wondered why, despite having good policy, you still end up paying out of your pocket during claims? This usually happens because of depreciation, the loss in your car’s value over time. Here, zero depreciation car insurance becomes a game-changer for policyholders. Let’s learn how.

What is Zero Depreciation Car Insurance?

Zero depreciation car insurance or bumper-to-bumper cover is an add-on you can use to top up your vehicle insurance. It allows you to get the full claim amount without any deduction for depreciation on car parts during claims. This means the insurance company will cover the entire cost of repairing or replacing damaged car parts, ensuring you pay nothing extra.

According to IRDAI, standard policies can reduce the claim amount by 30% to 50% considering the depreciated value of the car. However, with a zero dep cover, this deduction is waived off.

Here’s what zero-depreciation car insurance entails:

Inclusions

• Get full replacement cost for plastic, rubber, fibre, metal and nylon parts in case of accidental and transit damages.
• Fibreglass components get complete coverage, which is unavailable in standard insurance.
• You can claim the add-on twice in a policy term (which can vary by the insurer and your claim history).
• It is available for both new and old cars up to a certain age (typically five to seven years).
• You can also claim the paint cost without material depreciation.

Exclusions

• Zero depreciation car insurance cannot be added to a third-party insurance policy. It can only be paired with a comprehensive cover.
• It doesn’t cover engine damage due to oil leakage or water ingression (unless covered by another add-on).
• Tyres, tubes and batteries are usually covered only up to 50%, depending on the insurance provider.
• Any mechanical breakdown that’s not caused by an accident isn’t covered.
• Regular wear and tear aren’t covered.
• Damages that occurred under the influence of drugs, alcohol or any other illegal activity are excluded.
• Consumables like engine oil, brake fluid, nuts and bolts are not included (unless you have a consumables add-on).

Benefits of Zero Depreciation Car Insurance

Including a zero depreciation add-on to your car insurance offers several benefits. Here are some scenarios to help you understand better:

1. Lowers Out-of-Pocket Expenses

With zero depreciation cover, the insurer pays the full cost of repairing or replacing damaged parts without factoring in depreciation. This means you won’t have to pay from your pocket for plastic, metal, or fibre parts. It significantly reduces your financial burden during claims.

2. Ideal for New Cars

New cars with expensive parts lose value quickly. For instance, rubber, nylon, and plastic spares have a general depreciation rate of 50% under regular car insurance policy terms. If your car is less than five years old, you can bypass this rate completely with a zero-depreciation cover.

3. Save Costs for Expensive Cars

If you own a premium model, like Volvo or Audi, even minor repairs can be expensive. This add-on ensures you don’t feel the massive burden. For example, replacing a damaged LED headlamp in a high-end car can cost over ₹25,000, most of which would be saved with this depreciation cover.

4. Ideal for High-Risk Driving Areas

If you drive in heavy traffic or accident-prone zones, this cover can be helpful. In metro cities where minor accidents leading to dents and scrapes are common, having this cover saves repeated repair costs.

5. Claim Settlement Happens Faster

The add-on makes the claims process simpler, faster and more transparent as there’s no need for depreciation calculations.

Steps to Add Zero Depreciation Car Insurance

You can add zero depreciation car insurance cover either at the time of buying or renewing your policy. Here’s how to buy it:

1. Visit your insurer’s website.
2. Enter your current policy number, along with the necessary vehicle details
3. Select your existing comprehensive car insurance policy
4. Under available add-ons, select “Zero Depreciation”
5. Review and note the updated premium change
6. Make the payment
7. Download and save the updated policy document

How to Claim Zero Depreciation Add-On?

When you need to claim zero depreciation car insurance, follow these steps:

1. Contact your insurer and register a claim as soon as possible.
2. Record evidence of the damage from all angles. If needed, file an FIR with the police.
3. Take your car to an insurer-approved network garage for cashless repair and replacement.
4. Submit the required documents, such as photocopies of your policy, evidence photographs, driving licence, FIR and claim form.
5. A surveyor appointed by the insurer will inspect the damage and approve the repairs.
6. The insurer will settle the full cost of replaced parts (except exclusions) directly with the garage, with no depreciation deducted.
7. For non-network workshops, you will receive the full reimbursement amount after approval.
8. Pay any compulsory deductibles or costs not covered under the zero-depreciation add-on.

Key Takeaway

If you want to get a better claim settlement amount and reduce your expenses after an accident, zero-depreciation car insurance could be a wise choice. While the premium increases slightly when adding this rider to comprehensive car insurance, the protection it offers far outweighs the cost, especially for newer or high-value cars. It provides peace of mind knowing that you’ll receive the full value of repairs or replacements, thus saving on expenses.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.