What is Zero Depreciation Insurance and its Benefits

What is zero depreciation insurance, and what are its benefits?

Zero depreciation eliminates the 'depreciation' factor from the coverage. It is rightly referred to as Nil Depreciation or bumper-to-bumper coverage. It means that if your car or motorcycle is damaged in any collision, no depreciation is charged from the value of the car or motorcycle. The entire wear and tear of the vehicle, including all the spare parts, is calculated as zero.

Should you opt for zero depreciation insurance?

A zero depreciation policy is especially useful if you have recently purchased a new car. The reasons are listed below: -

• High-end vehicle owners

• Driving in accident prone areas

• If the cost of spare parts for your vehicle is too high and does not make sense 

• In case of an accident, you would want to minimize your expenditure to the lowest possible value

The benefits of car insurance with zero depreciation ​

• It helps to reduce out-of-pocket expenses because depreciation costs are not considered when filing for a claim settlement.

• It boosts the value of your IDV while costing only a little more. This ensures peace of mind in case of a claim.

• You will have complete peace of mind, similar to premium insurance, with very limited out-of-pocket expenses. All the insurance companies offer this coverage, and because it is a premium product, the claim settlement ratio for most insurers is very good.

How is the cost of a zero depreciation insurance policy calculated?

Factors that are considered to calculate a zero-dep car insurance premium include:

• Place of Registration –The insurance premium is usually higher in metros like Delhi, Mumbai, Bengaluru, etc. Also, the price is different in different cities, with the car price in Bengaluru higher than in other cities. Also, when the city is near the sea, the insurance price might be higher, for example, in Mumbai.

• Insured Declared Value (IDV) – This is the current market value of the insured car, from which the premium is calculated after depreciation is deducted.

• Engine Capacity – Vehicles with a higher engine capacity have a higher insurance premium.

• Installation of accessories – A premium is calculated separately for car accessories and additional features.

• Comprehensive car insurance premiums are higher than third-party car insurance premiums.

• The vehicle's age is also taken into consideration.

• The type of fuel used like diesel or petrol or CNG is also considered.

• Add-on coverages such as personal belongings coverage, roadside assistance, etc., might also impact the premium amount.

The car's current market value is the insured declared value (IDV). The insurance provider calculates the maximum insurance sum after considering the car's depreciation cost. The IDV is provided if the vehicle is completely damaged, totalled, or stolen. When you purchase zero depreciation insurance, as discussed already, the depreciation is not considered.