After a car accident, it can be extremely frustrating to realise that your insurance covers only part of the expenses incurred to replace expensive damaged parts, because the rest is eaten up by depreciation. To avoid such a situation, a Zero Depreciation Cover can be a worthy addition to the available add-ons in a standard car insurance policy. Read on to understand how the Zero Depreciation Cover works.
What does a standard car insurance policy offer?
Car insurance covers losses one might incur if a car is damaged or stolen. But there’s a catch. When a car is damaged, you are not entitled to 100 percent reimbursement of the expense incurred on the parts replaced. Depreciation, or the normal wear and tear that car parts undergo, comes into the picture. As per norms, only the residual value, i.e. the remaining value of the part after deducting depreciation, will be paid for by the insurance company. For eg: if a replaced part costs Rs 5,000, but 50% is the applicable depreciation rate, then you will only get a pay-out for Rs 2,500 only.
What are the rates of depreciation?
Depreciation means loss in the value of an asset due to use. Different materials and parts of a car have different rates of depreciation assigned by the insurance policy. The standard rates are:
What makes Zero Depreciation cover a good choice?
If you had a choice, wouldn’t you prefer to be compensated for the entire cost incurred on replacing damaged parts? High rates of depreciation will reduce the insurance claims, particularly for plastic parts that are prone to severe damage in case of an accident.
The Zero Depreciation Cover allows you to do just that. You receive full claim without any deduction for the depreciation on the value of replaced parts.
What is the additional premium payable for a Zero Depreciation Cover?
Premium paid for insurance depends on the Insured Declared Value (IDV) of the car, which is essentially the maximum amount you can claim in case of total loss or total constructive loss of your car, or in case it gets stolen or damaged beyond repair, within the policy period.
While car insurance premium generally depends on the car’s age, model and location, the additional premium for the Zero Depreciation rider could be up to 20 percent of a standard car insurance policy.
Does it make sense to pay a higher premium for this?
Zero Depreciation Cover makes sense –
Can I take Zero Depreciation Cover for any car?
This cover is generally allowed only for cars that are up to 5 years old.
What is not covered?
Accessories fitted in the car which are not part of the standard product are not covered. For instance, an externally fitted gas kit will not be covered, unless mentioned otherwise. Few insurance companies don’t include tyres and batteries.
Damage due to wear and tear and mechanical breakdown are not covered. Each company’s policy wordings will give more specifics on this aspect.
What else should I know before I buy this rider?
You need to know that there are limits to the number of claims you can make in a year. Generally, up to two claims are permitted.
How often do I have to renew the policy?
Normally, the tenure of a car insurance policy is one year and it has to be renewed annually. So the add-on too will be renewed along with the main policy.
Now that you know all about Zero Depreciation Cover, make an informed decision about this add-on and enjoy the benefits.
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The next time you’re buying or renewing a car insurance policy, make sure you ask about these 7 riders and include the ones you feel are suitable to your needs.