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Zero depreciation cover for vehicle insurance

A zero depreciation cover ensures that in case of an accident, you will receive the full claim without any deduction for depreciation on the value of the parts replaced

December 28, 2012 2:15 IST | India Infoline News Service
Ajay Shah a deputy general manager working in a Mumbai-based firm, was upset with his insurance company when he learnt that he had to spent Rs. 45,000 from his pocket when he incurred total expenses of Rs. 1.5 lakh towards repairs for his car. Ajay had bought a standard motor policy hence he got the claim after the deduction for depreciation. Instead of paying the entire amount of Rs. 1.5 lakh towards the claim, the insurer paid him 30% less i.e. Rs. 1,05,000. Ajay could have saved Rs. 45,000, if he would have opted for a ‘zero depreciation policy’.

Depreciation means decrease in the value of an asset due to use. Zero depreciation or ‘zero dep’ policies are gaining popularity with increasing awareness among vehicle owners in India. These policies offer full claim without deduction for depreciation on the value of parts replaced. This cover extends to the repairing costs of fibre, glass, rubber parts and plastic. In standard motor policy, rate of depreciation ranges from 0% to 40% depending on the age of vehicle and the type of material, thereby making you shell out some money from your pocket. While in case of a zero depreciation policy, no depreciation is charged, thus a 100% re-imbursement on replaced or depreciated parts can be availed leading to optimum benefit under the cover.

The IRDA (Insurance Regulatory and Development Authority) allowed these policies to make their entry into the Indian market about two years ago. Some insurers which provide depreciation cover include Tata AIG General, Bharti AXA General, ICICI Lombard General, Reliance General and HDFC Ergo General.

Zero depreciation cover is usually available on new cars and mostly do not cover cars that are more than three years old. The premium is slightly higher than in a standard motor policy. Also certain companies put a restriction on the number of claims that can be opted without depreciation during a policy period. For instance: Bharti AXA General pays two claims in a policy period without deduction of depreciation.

Besides providing zero depreciation, some insurers also ensure that the policyholder does not lose his no-claim bonus.  

What is not covered?
There are few conditions which are not covered under the zero depreciation policy.
  • Wear and tear
  • Damage to uninsured items like accessories and bi-fuel/gas kit, tyres
  • Damage due to uninsured peril
  • Damage due to mechanical breakdown
  • The tenure of zero depreciation policy is normally one year and has to be renewed annually. You can buy depreciation cover online along with your car insurance policy.

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