What is Zero Depreciation Policy in Motor Insurance?

Buying a car is not much of a task today considering a wide range of loan options available, which if sanctioned you can drive home the car within two days. If you’re a first time car buyer, there are several things you must know before finalizing the deal for the car. The process of buying insurance is a key part of your car purchase as it provides cover for the damages incurred by a vehicle due to an accident.

However, people who have owned traditional insurance policies buy insurance just for the sake of completing the formalities. The process of claiming insurance with traditional policies was elaborate and bore no results; people became least interested in paying heed to car insurance.

To get rid of the negligent attitude of people towards insurance, companies came up with the idea of Zero Depreciation Insurance policies. A policy that insures the policyholder’s vehicle and offers full cover for repair without the insured having to pay a single penny. So if you are planning to buy cars from brands like Jeep, Mercedes-Benz, Audi, BMW and Volvo zero depreciation policy is a must as the expense for repairing for such cars can cost a bomb.

How does Zero Depreciation insurance works?

A Zero Depreciation policy has some distinct features that set it apart from the other policies. Unlike traditional policies, it ignores the depreciation factor of your car and provides full cover. It also has a cover structure, which bifurcates the amount of cover that will be provided for the damages. This bifurcation, or commonly known expense classification, is based on the material of the parts affected. This can be understood better with the help of an example. Suppose you own a car worth INR 10,00,000 then the expense covered for insurance would be bifurcated as follows:

Parts Cost Of Damage (In INR) Cost Of Depreciation (In INR) [With Zero Dep] Amount (In INR)
Metal Part 9,000 450 0.05
Plastic Part 12,000 6,000 0.5
Fiber glass Parts 3,000 900 0.3
Windscreen 2,000 0 0
Labor 4,000 0 0
Total 30,000 7,350


What are the things to consider while buying a Zero Depreciation Insurance Policy?

A zero depreciation insurance policy may sound good for new car buyers but there are some things that one should take a closer look at.

  1. Cost: The premiums of a traditional policy are much lower when compared to a zero depreciation policy, which means that the extra premium money you are paying is for the better and hassle-free cover.
  2. Number of claims: Since it offers full coverage for the damage expense, there are some people who might think of filing for the claims every time they face problems with their vehicle. To stop people from doing this, insurance companies offer claims on up to a certain number of times in a year.
  3. Only for new cars: The maximum number of years a zero depreciation policy can cover a car is 4 to 5 years after the purchase. Once this period is over, the car owner will not be eligible to apply for zero depreciation

If you are a new driver or driving after a long period of time, it is important to buy a zero depreciation policy as it can be beneficial for damage cover.

If you have queries on the types of Car Insurance do feel free to drop us a message at PL-India Motor Insurance and we shall revert at the soonest. Alternatively, do email us at insurance@plindia.com.


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