What is zero depreciation car insurance? Why is zero depreciation car insurance or zero dep insurance important? this is the term that you will always hear from insurance agents when buying a car. The insurance agents recommend that you should take Zero Dep or Nil Dep car insurance.
If you are also a car owner then you must be in dilemma about the two the declining cost of your car and rising the cost of repair of your car. If you buy regular 4-wheeler insurance or car insurance online or offline then that car insurance policy only covers the depreciating value of your car, not the repair cost of your car which you have to bear on your own.
This is the reason why car owners often go for zero depreciation car insurance because zero dep car insurance will provide full repair or replacement coverage of the car without depreciating its value.
What Is Zero Depreciation Car Insurance?
If you are also in fear that the repairs and replacements you have done on your car bearing all the expenses by your own will lead to the depreciating price of your car. Then you should go for Zero Depreciation car insurance often known as zero dep insurance.
Zero Dep insurance is a type of “Add-on” on your insurance policy, add on means Additional Top up which you buy on your policy.
It can be taken only when you opt for “First Party Insurance” not for “Third-party car insurance”. If you don’t know about third-party car insurance then here is a small brief about it.
Difference Between Third Party Insurance And First Party Insurance
Third Pary Insurance Policy
If you are planning to buy or have a third party insurance then you know that in third-party insurance, if you have a car and if you hit or damage some 3rd person’s car or if you damaged his property or car or any kind of other loss, then that loss of 3rd person is covered under 3rd Party Insurance.
Check Out- Understand more about third-party insurance’s advantages and disadvantages
First Party Insurance Policy
If you planning or have a first party car insurance then you should know that in First Party insurance, all benefits of 3rd party insurance will be the same.
Even your own car damage in an accident will be covered that is the big difference in 1st Party Insurance and 3rd Party insurance party is a compulsion and you don’t have a choice if you want to drive on Indian roads as per Indian Motor Vehicle Act 1988, then having First party insurance is one’s own choice, the law does not bound you for that.
Depreciation In First Party Insurance
It’s optional so suppose you get “1st Party Insurance” and one’s own car damage is covered under the policy. During the claim settlement company doesn’t pay you all the money and uses the term “Depreciation” for that now what is Depreciation?
Understanding Zero Depreciation Insurance
Suppose you buy and product from the market today so with time there will be wear and tear in the product and with its usage, wear and tear will increase may be some material loss or physical damage these all losses are called depreciation which ultimately results in reduction in value of product.
If your car gets hit in an accident then all the parts that your car presently has in it would have suffered some or other depreciation already before the accident.
Insurance companies do not pay for that depreciation to you. Suppose your car had a spare part of value Rs. 100 and for that part company would have set some depreciation loss % let’s say 30% depreciation after one year of usage. And your car met and accident after 1 year so the insurance company will only give me the remaining Rs. 70 while you had to pay Rs. 100.
And that too when you have insured you car damage under 1st party insurance so why to give me only Rs.70 and why not full Rs. 100. So to cover this gap between these values Insurance Companies offered an “Add on” named Zero Depreciation.
And to get that you need to pay an extra premium over First Party Insurance. So that if by mistake your vehicle meets some accident. Depreciation won’t be counted during claim settlement.
But there is a time limit upto what you can take this “Add-On” If you buy a new vehicle today you can take Zero Depreciation for next 5 years. You dont need to worry about any damage for next 5 years.
Additional Risks Covered By Zero Dep Insurance
Zero Depreciation insurance covers this additional financial risk of yours but you need to consider few points which are as follows:
Bonus Point: Bonus Point or generally called No Claim Bonus or NCB to understand this let’s say you got an Insurance and your car got no damage in the whole year and you didn’t take any claim from the insurance company and saved money from the Insurance Company.
So the insurance company will give benefits to those who don’t claim any money for the whole year. So next time when you will renew your Insurance Policy there will be a component in the policy premium named Vehicle Own Damage you don’t have to pay some percentage of that component next year. And it keeps on increasing every year like 20% then 30%, 40% and it will go upto 50% of Own Damage Component.
IRDAI Regulatory: According to IRDAI, Regulatory Authority of Insurance in India has brought in new amendment in this you can claim any number of times you suffered loss in vehicle. earlier it used to feel like a restriction on claims.
Now you can claims 365 claims in 365 days for sake of possibility this was all about Zero Dep Insurance.