After a car
accident, it can be extremely frustrating to realize 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:
50% for
parts which have high wear and tear like as plastic/rubber parts of the car,
battery, tyres/tubes etc.
30% for
fibre glass parts
0-50% for
metallic parts, depending on the age of the vehicle
Related: Car
insurance: What is covered and how much? [Infographic]
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 –
If you have
a new car - The minute your car comes out of the showroom, depreciation comes
into play. So, if you damage your car the next day, you can only claim a
fraction of the cost to replace plastic parts etc.
If you have
a high end luxury car – Each spare part of a luxury car costs an arm and a leg.
So, why not have the option of claiming the full value of a replaced part?
[Source: https://www.tomorrowmakers.com/articles/car-insurance/all-you-need-to-know-about-zero-depreciation-cover-in-car-insurance]
Thanks for sharing this informative blog, it seems very helpful i was looking for same kind of content on car insurance.
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