Every motor vehicle loses its value over time and your car is no different. The market value of a car reduces as its age increases and this difference in the value is referred to as depreciation. A car suffers from deprecation even if it is rarely used or is in the best shape.
Depreciation applies not only to the car but also its parts, such as plastic, metal, fibres glass, etc. These non-durable car parts also depreciate with time and their value decreases gradually. The good news is that the rate of depreciation applicable to a car and its parts are fixed by the I.R.D.A.I or Insurance Regulatory & Development Authority of India. For instance, cars less than 6 months old suffer a depreciation of 5% while their plastic parts suffer a depreciation of 50%.
The depreciation applicable to a car also impacts the IDV or insured declared value of the vehicle. IDV is the maximum claim amount that your motor insurance company will pay you in the case of a total loss or theft claim. The motor insurance company calculates the IDV of a car before the commencement of the policy by reducing the depreciation value from the manufacturer’s listed price.
Thus, the greater is the depreciation, the lower will be the IDV of the car and hence, the lower will be the claim amount that your insurer will pay.
But it is possible to protect your car and its parts from the applicable depreciation with a zero depreciation cover.
What Do You Mean by Zero Depreciation Cover?
Zero depreciation cover is an add-on cover that ensures no depreciation is calculated on the value of your car during claim settlement. It ensures that the IDV of your car is equal to the manufacturer’s listed price, thereby, increasing the overall claim amount that you will get during the theft and total loss claims.
The zero depreciation cover is available for an additional premium and you need to buy it additionally under your comprehensive car insurance policy. When a zero depreciation cover is purchased under a comprehensive car insurance policy, it is considered as a zero depreciation car insurance policy.
However, zero depreciation cover can be purchased mostly for cars that are not more than 5 years old. Some insurers offer this add-on for cars up to 7 years old too. Thus, it is best to check with your insurer and get the exact guidelines on vehicle eligibility to buy a zero depreciation cover.
Benefits Offered by Zero Depreciation Car Insurance during Claim Settlement
A zero depreciation car insurance policy can benefit you during the settlement of your claims. Take a look at the benefits below:
1. Enhances Your Car Insurance Coverage
The zero depreciation car insurance policy provides higher insurance coverage to your car. The zero dep cover ensures that depreciation is not considered at the time of estimating the IDV of your car. As a result, a higher IDV is fixed for your car resulting in enhanced insurance coverage.
2. Increases the Claim Amount
With zero depreciation add-on cover, the IDV of your car increases as no amount of depreciation on the car and its parts is considered. This means that the maximum claim amount that you are likely to get for raising a claim for a total loss or theft of your car also increases. Thus, you end up getting a higher compensation amount for the losses and expenses arising out of your car under a zero depreciation policy as compared to a regular comprehensive car insurance policy.
3. Reduces Out-of-Pocket Expenses
The zero depreciation cover helps to reduce your out-of-pocket expenses when your car is getting repaired for damages. This is because you will receive a higher claim amount with depreciation not being considered under a zero depreciation car insurance policy. This leads to lowering the gap between the claim amount received and the actual cost of repairing the damages sustained by your car. As a result, the money that you would have to spend from your pocket also reduces.
Summing It Up
Zero depreciation cover is the most beneficial way of enjoying a higher IDV and reducing your out-of-pocket expenses during claims. Although the cover comes for a nominal price, it can help you save a large sum of money in case your car gets damaged. Thus, you should certainly go for zero depreciation car insurance if your vehicle is eligible and reap its benefits during claim settlements.