What is Zero Depreciation Car Insurance?
Zero Depreciation Car Insurance, as an add-on, excludes depreciation when calculating your policy. Typically, car insurance claims consider the depreciation accumulated over time due to age and use. With Zero Depreciation Coverage, you can receive the full replacement cost of your vehicle’s parts without factoring in depreciation, enhancing your car’s financial security.
Depreciation Explained
Depreciation is the reduction in the value of an asset over time. In the context of auto insurance, it signifies the gradual decrease in the value of your car’s parts due to factors such as age, usage, and wear and tear. The Insurance Regulatory and Development Authority of India (IRDAI) sets the depreciation rates for automobiles in India, which are applied annually.
| Age of Car | Percentage of Depreciation |
|---|---|
| 0 to 6 Months | 5% |
| 6 Months to 1 Year | 15% |
| 1 Year to 2 Years | 20% |
| 2 Years to 3 Years | 30% |
| 3 Years to 4 Years | 40% |
| 4 Years to 5 Years | 50% |
Who Should Opt for Zero Depreciation Car Insurance?
Zero Depreciation Car Insurance is recommended for new car owners, sports car owners, and luxury car owners. It provides full coverage for your vehicle, sparing you from the impact of part depreciation, ensuring a more comprehensive auto insurance policy.
Benefits of Zero Depreciation Car Insurance Add-On
- Increased Coverage: Adds to the total coverage of your vehicle.
- Higher Claim Amount: Allows full reimbursement for repairing or replacing damaged components without depreciation reduction.
- Lower Out-of-Pocket Expenses: Mitigates the need for additional expenses due to depreciation.
- Nominal Additional Cost: Provides significant coverage benefits with a small additional expense.
- Peace of Mind: Ensures your car is fully insured against losses, including depreciation.
How is Depreciation Calculated?
| Car Components | Rate of Depreciation |
|---|---|
| Rubber, Plastic and Nylon Parts; Batteries | 50% |
| Fibre Parts | 30% |
| Wooden Parts | 5% (1st year), 10% (2nd year) |
| Age of Car | Percentage of Depreciation |
|---|---|
| 0 to 6 Months | 5% |
| 6 Months to 1 Year | 15% |
| 1 Year to 2 Years | 20% |
| 2 Years to 3 Years | 30% |
| 3 Years to 4 Years | 40% |
| 4 Years to 5 Years | 50% |
If you don’t have zero depreciation coverage, your auto insurance claim amount will be calculated after subtracting the depreciation on your vehicle’s parts. It is advisable to get a zero depreciation add-on for your auto insurance policy to ensure full coverage.
Use our automobile insurance premium calculator to determine the premium amount and add the zero depreciation add-on to your insurance provider online for enhanced financial protection.
