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The timely decrease in an asset’s value is known as depreciation. Your cars also fit into this category. The value of a vehicle and its components reduces over a period of time. Depreciation in the context of auto insurance is this: An automobile that is six months old costs less than one that is brand new and is the same make and model. Materials including metal, glass, steel, rubber, copper, specific fibres and plastic are all utilised to construct cars, and each of these materials depreciates at a different rate.

The depreciation rate on these parts is a factor in deciding your car insurance. Thus, the Insurance Regulatory and Development Authority of India (IRDAI) has established some standards to determine it. #

It goes like this:

Types of components Rate of Depreciation
Parts made of plastic, nylon, and rubber; tyres and tubes, batteries, and airbags 50%
Parts made of Fibreglass 30%
Glass 0
Parts made of Wooden & Metallic make

Source: IRDAI #

The depreciation is computed using the vehicle’s age as listed in the table below:

Age of the Car Rate of Depreciation
< 6 Months 0
Between 6 months to 1 year 5%
More than 1 year but not 2 years 10%
More than 2 years but not 3 years 15%
More than 3 years but not 4 years 25%
More than 4 years but not 5 years 35%
More than 5 year but not 10 years 40%
More than 10 years 50%

Source: IRDAI #

Your car is likely to collide with another vehicle, given the chaotic traffic on Indian roadways. As a result, Repair costs are bound to be incurred, which will increase your financial liability even more. If it were ever to happen that you need to replace parts of your car, the insurance company would only pay out for the depreciated value of the parts, leaving you to foot the bill for the balance. As a result, you should go ahead and add a Zero Depreciation cover to your comprehensive car insurance policy so that you may benefit from it. In the event that you’ll need to file an insurance claim, this will assist you in getting the most extensive payment possible. *

But what is Zero Depreciation Cover?

The insurance company will pay for your car’s damages if you have an accident. The amount you receive, however, is less than the average rate at which the car’s components depreciate.

If you choose the Zero Depreciation add-on, however, the insurance provider will pay you the entire worth of the car’s parts without taking depreciation into account. Typically, you can only get this coverage if your vehicle is brand new. You can add the Zero Depreciation cover if you still need it when you have to go for a car insurance policy renewal. *

What’s the difference between standard auto insurance coverage and zero depreciation cover, you ask?

Zero-Depreciation Cover Standard Auto Insurance Coverage
There is an added premium fee. The premium may be less since you have not included the rider.
If your car is new, you should buy this protection. This coverage is available for both new and used vehicles.
The insurance is responsible for the total cost of damaged auto parts. The insurer is only responsible for the depreciated value of the damaged auto parts.
You obtain a complete reimbursement, and the claim settlement is unaffected. You receive your claim amount after standard depreciation deductions have been made.

Benefits of opting for a Zero Depreciation Insurance *:

  • The addition of Zero Depreciation Cover to your current Auto Insurance Policy can help you Save Money.
  • Your costs are virtually completely eliminated.
  • It provides financial protection against damages or losses caused as a result of an accident.
  • Zero depreciation coverage is advantageous to both – novice and experienced drivers.
  • Without taking depreciation into account, the cost of replacing the insured parts is reimbursed.

You might be able to get Zero Depreciation Cover from many insurers. However, be careful to only buy it from reputed insurance companies. It is advisable to do a car insurance check online, look up the insurance provider’s evaluations on the internet or ask for personal recommendations. Additionally, prior to making a purchase, use an online vehicle insurance calculator to estimate premiums in order to acquire the best price possible.

* Standard T&C Apply

# Visit the official website of IRDAI for further details.

‘Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.‘

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