A Comprehensive Guide to Zero Depreciation

It is not uncommon to see policyholders get a rude shock when they see the deductions made on insurance policy before reimbursing the repair bill amount. Not knowing about these deductions leads to poor choices in getting coverage for a car insurance. For repair bills reimbursement, depreciation is one major component which is deducted by an insurance company before the payout towards a claim. . It is important to note that this wouldn’t have been the case if the policyholder had opted for a zero depreciation add-on with his/her comprehensive insurance policy.

If you are interested to explore the concept of zero depreciation further, then you are at the right place. We look at everything there is to know about zero depreciation and how you can use it to your advantage for your car repairs and policy claims.

What is bumper to bumper insurance?

A car insurance policy provides coverage as per the choices made by the policyholder. The base coverage is a comprehensive policy (which covers bodily injury and car repairs to own as well as to the other party). Then there are add-ons which improve the extent of coverage your four wheeler gets. Zero Depreciation is one such add-on that you can add to your policy coverage for a nominal amount.

What it does?

As an add-on, Zero Depreciation (also known as zero dep insurance, Nil-Dep insurance, or bumper to bumper insurance) provides coverage without deducting the depreciation value. As you know, an asset depreciates in value over time. Similar is the case with your car. Its value starts reducing the moment you take its delivery from the showroom.

The below are different components and its applicable depreciation rates as per IRDAI:

  • Depreciation against rubber, nylon, and plastic parts – 50% depreciation be deducted,
  • Depreciation against fiber glass components – 30% depreciation be deducted, and
  • Depreciation against wooden and metal parts – The rate is determined according to the car’s age (e.g. 5% in the first year, 10% in the second year, going up to 50% in 5th year

With this add-on, you can be assured that the insurance company will not be deducting the applicable depreciation amount when processing your claims.

Benefits of zero depreciation

  • Better claim settlement without considering depreciation: With the zero depreciation add-on, you can be assured that you avail of better claim settlement. Rather than paying for the depreciated amount (for a policy not having zero depreciation add-on), you can expect the insurance company to bear this amount.
  • Covers repairs of plastic and fiber parts: You can expect 100% settlement of repair costs. While a standard policy doesn’t cover for plastic and fiber parts entirely, a zero depreciation add-on will consider this for claims payout.
  • Better value for money: The premium amount may increase nominally when you opt for this add-on. However, the returns will far outweigh the costs, especially after a major accident to a car.
  • Better protection especially for new cars: This type of comprehensive insurance with zero depreciation add-on cover covers costs of all the parts. The bumper to bumper protection offers total peace of mind, especially to new car owners.

Zero Depreciation Policy – Factors to be aware of

  • Premium is higher: The cost associated with having an enhanced coverage is nominally higher than plain vanilla comprehensive policies. By paying for the future costs, you can avail of peace of mind when the claim actually arises.
  • Usually only two claims allowed a year: With this coverage, insurance companies usually limit the number of claims you can make in a year. This way, they ensure that policyholders don’t file a claim for every little dent or scratch, simply because they can get it done for free.
  • Works well for a new car: The zero depreciation is applicable only to cars aged 1 to 5 years. In recent times some companies have started offering zero dep coverage for 7-year old cars as well.
  • Doesn’t work in standard wear and tear: Routine wear and tear such as clutch plates, brakes, and bearings are excluded in zero depreciation insurance. It also excludes engine oil, coolant, or brake oil.

Who should buy zero depreciation?

Zero depreciation is usually 15-20% of the premium amount and is an ideal add-on for certain scenarios. Take a look at some cases where zero depreciation makes total sense to opt for with your insurance policy:

  • High end and luxury car spare parts that are expensive to repair and come with spare parts that are costly to replace or fix
  • New car owners (less than 5 years old)
  • Cars that run on roads with high car density and high likelihood of accidents. Here zero depreciation insurance coverage will assure peace of mind when driving on such roads.
  • For cars with expensive spare parts. Zero depreciation will protect you from bearing the costs of such spares from your own pockets
  • It is ideal for drivers who are improving their driving skills and are more prone to accidents

How is zero dep amount determined?

Zero depreciation is based on a few crucial factors such as

  • Age of the car
  • IDV of the car
  • Car model and variant
  • Location where you are based

Difference between comprehensive insurance with zero depreciation & without zero depreciation

You may want a compelling reason to pay additional upfront for future costs. So, here is the key difference between comprehensive and zero depreciation insurance:

Pointers Insurance with zero depreciation Insurance without zero depreciation
Coverage during claims Better coverage as depreciation amount is not deducted before payout of claim Lower coverage as depreciation is factored for metal, fiberglass, and plastic parts before payout of claim
Premium Higher Lower
Who it is good for? Ideal for those who don’t want to pay for claims from their pockets and bumper to bumper coverage Ideal for those who don’t want to pay higher premium and are ok with higher repair bills to be borne from own pocket
Number of claims allowed Usually only two claims are allowed to prevent misuse More than one claim is allowed by many insurance companies

The below table is a great way to show the savings incurred even after paying extra to opt for zero depreciation:

First, we have a look at the depreciation calculated on a Rs. 7-lakh car

A. Depreciation table

Repair bill breakup Repair Amount (Rs.) Rate of depreciation Amount of depreciation (Rs.)
Metal Spares 8,000 5% 400
Fiber Spares 1,500 30% 450
Plastic Spares 12,000 50% 6,000
TOTAL 21,500 - 6,840

B. Comparison table

Cost of claim amount With Zero Dep Add-on Without Zero Dep Add-on
Basic premium (A) 12,000 12,000
Premium on zero depreciation cover (18% of premium for illustration purposes)(B) 2,160 -
Policy amount = A+B (C ) 14,160 12,000
Cost of repair as per first table (D) 21,500 21,500
Depreciation amount paid by policyholder (E ) - 6,850
TOTAL costs borne by policyholder = C+E (F) 14,160 18,850

It is clear that even with an additional cost of Rs. 2,160, the policyholder ends up saving Rs. 4,690 on the claim made.

How to get Zero Depreciation Car Insurance with Turtlemint?

Buying a zero depreciation car insurance with Turtlemint is very simple. All you need to do is fill up information about your car and select Zero Depreciation as an add-on. You will be presented with quotes from different providers. You can pick one that is the best and lock it for your four-wheeler. In just 3 steps, you can buy car insurance online by visiting our secure website:

  • Enter details about car, city, name information to see basic quotes from different providers
  • Select comprehensive insurance and Zero Depreciation as add-on
  • Check revised premium and make payment to lock zero depreciation policy to your car

Why Choose Turtlemint for Zero Depreciation Car Insurance

When you set out to buy a Zero Depreciation Car Insurance, you will need to factor in quite a few things. You will need to check the different quotes and also be able to add the right add-on to provide solid protection for your four-wheeler. This will ensure that you get a winning deal in online insurance quotes.

At Turtlemint, we will help you simplify the entire process of buying a Zero Depreciation Car Insurance online. Some reasons why you can look forward to purchasing a zero depreciation policy from us include

  1. Total Support: At any point in time during the process of viewing quotes or while buying a policy, there may be many issues that can come up. If you don’t get a timely response, you may drop the idea of buying online insurance totally. This is why we at Turtlemint are there for you. Our team of experts is just one phone call away. You can connect with us on phone or on chat and get your issues clarified.
  2. Expert services: With Turtlemint, you can clarify any and every doubt about Zero Depreciation Car Insurance. The simple explanations and unbiased suggestions are just what you need to make a smart buy online.
  3. Claims support: It may be possible that you may need a considerate guide to help you go through the maze of correct claims procedure. You can count on us for total support to get your claims filed, processed and paid out successfully.
  4. Best quotes: It is not possible in today’s busy times to go to every insurance provider’s office and take out quotes and then compare them. With the online comparison facility at Turtlemint, you are presented with best quotes on Zero Depreciation Car Insurance. You can get quotes at any time, from any place where you are surfing the Internet. This lets you compare the different quotes and pick one as per your preference.