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Importance of a Zero Depreciation Policy in Car Insurance Claim

When you buy a car insurance plan, you expect to get covered for all the financial losses that a car repair may lead to. However, at times you only get a part of the costs and are forced to pay the remaining amount out of your own pocket. This happens mainly because of the depreciation factor in motor insurance. A vehicle ages with time and a lot of wear and tear takes place. The insurance providers take this into consideration when settling a car insurance claim. What is the solution to this problem then? Well, it is very simple. All you must do is opt for a zero-depreciation cover by paying an extra premium when buying your car insurance policy. Look at this article to know more.

What is depreciation?

Let us start with understanding the concept of depreciation in car insurance. Every vehicle that plies on the streets, experiences wear and tear. The engine, the gear box, the brakes and even the parts of the vehicle’s body age with time. The value of a worn-out part is obviously less than the value of a new part. So, the insurance providers also take note of this and pay a reduced claim amount, keeping the depreciated value in mind.

What is a zero-depreciation policy?

When you buy a car insurance plan, you can either buy an add-on zero depreciation cover or you can buy a zero-depreciation car insurance policy. Either way, you will get protection against the depreciation factor when making a claim. This feature negates the depreciation that makes place in the vehicle and when you make a claim, the entire amount is paid out (after deducting the co-pay, of course). So, it saves you a considerable amount of money.

What are the advantages of zero depreciation in car insurance?

Let us look at the main benefits:

  • Lowers the out-of-pocket payments: Since the depreciation is not considered, your out-of-pocket payment reduces. This gives you a financial advantage and helps you save more in the long run.
  • Faster claim: A car insurance claim takes longer to settle because the insurer calculates the depreciation on each part to see what the claim amount should be. With no depreciation in the picture, the claim is settled at a faster pace as a uniform amount is paid out.
  • Peace of mind: With a zero-depreciation policy, you get a lot of mental peace. This is because you are assured of getting the maximum claim amount without having to worry about the depreciated value of the vehicle and its parts.

Things to know about zero depreciation car insurance

There are a few important things that you must know before you opt for a zero-depreciation car insurance policy. They are:

  • Only available on newer cars: Zero depreciation car insurance is usually only available for cars which are five years old or lesser than five-year-old. A car which is more than five years old cannot be covered under such a plan.
  • Limit on claim: Most of the zero depreciation plans have a limited number of claims. So, you cannot expect to make a claim every single time you send your car for repairs.
  • Extra accessories not covered: Most zero depreciation plans only cover the standard car accessories. So, if you install any additional part, which was originally not present in the car, you cannot get covered for it.

Rates of depreciation:

Mentioned below are the standard rates of depreciation:

  • 50% for tyres/tubes, plastic or rubber parts of the car, batteries etc.
  • 30% for fibre glass items
  • 0-50% for the metallic parts, however solely depending on the depreciation factor


As you can see, there are many advantages of getting a zero-depreciation car insurance cover. You will see how important it is when there is a large claim. Without this cover, you may have to end up footing a hefty amount of the bill yourself. This cover is especially useful for those people who own expensive cars, but is beneficial for others too. So, if you are planning to make some alterations to your basic car insurance cover, consider getting a zero depreciation policy. You will surely not regret the decision thereafter.


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