Why Are Zero Depreciation Policies Considered Better?
Accidents happen, and no matter how careful you are, something may go wrong. In the case of a car accident, a car insurance policy helps in covering financial losses. When you file a claim against vehicle insurance, the insurance company will pay you compensation against the actual value of the parts which you got repaired or replaced.
Now, the first thing you need to understand is that the actual cost is not the cost of the new part. It is calculated by subtracting depreciation from the MRP. When the insurance company applies depreciation, the compensation insurer has to pay decreases substantially. That means the insurance company is only going to pay a part of the repair cost.
The zero depreciation cover
Zero Depreciation either comes with some policies, or you can buy it as an add-on by paying an additional premium. It increases the cost of car insurance to some extent, but the benefits are much more that you pay. Zero depreciation cancels the effect of depreciation on the amount payable by the insurer. When you apply for the claim, the company will pay the entire cost of the damages and replaced parts.
For example, A had an accident while going home. His three years old car got damaged, and the claim amount comes out to be higher than expected. However, the insurer factored in depreciation and paid only a part of the bill. Now, if A had bought Zero Depreciation policy or add-on, the scenario would have been different. In such cases, the insurer pays the entire bill amount irrespective of the age and market value of the vehicle.
What is the difference between Zero Depreciation and Standard car insurance policy?
The first and most important difference is the amount the insurer will pay in case of an accident, especially when the car is a couple of years old. Secondly, as there is an additional benefit attached to Zero Depreciation policy or add-on, the premium amount that you have to pay will be higher.
Why are Zero Depreciation policies considered better?
There are many benefits of Zero Depreciation Car Insurance. Some of them are listed as follows:
- Full reimbursement for the repaired or replaced parts
The insurance company will not apply depreciation as the years pass by. In the case of plastic, nylon, and rubber parts, the depreciation is approx 50 percent, while in the case of fiberglass parts, it is 30 percent, and for wooden or metallic parts, it depends on the terms and conditions. In most cases, it increases as the years pass by, such as 5 percent for the first, 10 percent for the second, and so on. If you have Zero Depreciation policy, such deductions will not apply.
- It saves your money
Zero Depreciation policy ensures that you get the full amount reimbursed in case of repair or replacement without any deductions because of the age of the vehicle. That means you are going to save a considerable amount of money.
- It is affordable
Though additional cost added to the premium for Zero Depreciation policies or add-on varies from plan to plan, it is considered one of the most affordable options that you can have to ensure you get the right amount for the claim. You can compare the sum assured and premium online and choose the right policy for you.
Some important points to remember
- It is only available for vehicles which are not more than five years old.
- It is essential for new cars with expensive parts.
- If you have a luxury car, you should get this add-on.
- It helps in increasing the claim payout.
- Some factors can still allow the insurer to pay a lesser amount. Please refer to the terms and conditions of the policy before you purchase or renew it for your vehicle.
Car insurance policy is important to safeguard your finances. Without a proper car insurance policy, you will not be breaking the law, but you will be putting yourself and the family members in a risky situation. You must have a comprehensive car insurance policy to ensure proper coverage. Zero Depreciation policy or add-on will help in nullifying the depreciation that insurance companies impose every year on the payable amount. This add-on will ensure that you get the actual bill amount for the repairs and replacements for the claim that you have filed.
