When you own a car, its insurance is an essential consideration to remember. The Motor Vehicles Act of 1988 makes it mandatory to have a car insurance policy, and hence, is one of the legal requirements of owning a car. Such an insurance cover not only helps in ensuring you are on the right side of the law, but also offers protection for the damages to your vehicle.
Depending on the type of policy you buy, the coverage differs. Third-party plans and comprehensive plans are two broad categories to choose from. Since third-party coverage is the minimum required insurance cover, it is mandatory to at least have third-party policy. The scope of this plan is limited to damages and injuries to a third person. Thus, any legal liabilities on you, the policyholder, is covered by a third-party insurance cover.
Comprehensive plans are an alternative to third-party policies. These plans provide coverage for the repairs that are required to your car in addition to third-party losses. Hence, it is a more inclusive insurance policy that safeguards you from financial losses. In addition to covering the repair costs of your car, comprehensive plans allow customisation of the coverage. This way, any limitations in the coverage can be overcome using add-on covers. *
* Standard T&C Apply
Depreciation is one factor that significantly lowers the insurance payout in standard comprehensive plans. When you buy a zero depreciation add-on in your car insurance online or offline, the compensation paid by the insurance company increases. Thus, the add-on has the effect of reducing the out-of-pocket expenses and maximising the compensation under an insurance claim. For this reason, a zero-depreciation plan is also known as nil depreciation cover, bumper-to-bumper cover and even zero-dep policy. *
As your vehicle’s age increases, so does its depreciation, in effect, lowering the compensation paid by the insurer. Hence, for older vehicles, a zero-depreciation cover is an effective way to increase the compensation offered by the insurance company. *
* Standard T&C Apply
Calculation of depreciation for older cars
The depreciation element of your car is directly proportional to the age of the vehicle. Hence, new cars have a lower depreciation vis-a-vis older vehicles. The table below mentions the rates of depreciation based on the age of the vehicle –
|Age of the Car||Rate of Depreciation|
|Less 6 months||0%|
|6 months to 1 year||5%|
|1 year to 2 years||10%|
|2 years to 3 years||15%|
|3 years to 4 years||25%|
|4 years to 5 years||35%|
|5 years to 10 years||40%|
|Above 10 years||50%|
How does a zero-depreciation cover benefit older cars?
A zero-depreciation cover is an added policy feature and hence, impacts the car insurance prices. However, it has the following benefits for old cars and which is why you must opt for one –
- Compensation for the increased cost of repairs
As your car gets older, the repair costs go on increasing due to the impact of depreciation. Using a zero-depreciation plan, these additional repair costs, that otherwise would be required to be paid from your own pocket, are covered by the add-on. The only cost you need to pay for are the deductibles in your policy and those repairs that are outside the policy coverage. *
- Higher insurance claims
The next advantage of buying a zero-depreciation cover for old cars is that a higher compensation is paid by the insurance company. What otherwise would be excluded from the compensation, is now paid when you have a zero-depreciation plan. *
- Long-term benefits
Prima facie it might seem like the zero-depreciation cover increases the premium of your insurance policy. However, despite the marginal increase in premiums, it proves to be an affordable option considering the long term savings it offers. To know how it impacts the premiums, you can make use of a car insurance premium calculator. *
* Standard T&C Apply
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.