What is Zero Depreciation Policy in Car Insurance? Do we call it Zero Dep Policy or Zero Debt Policy in India? How is it different from Standard Comprehensive Cover?
My friend Manish, who is working in a Mumbai-based firm met with an accident recently. The car damages were in the range of Rs. 1.5 lacs to 2 lacs. When he filed a claim, the Insurance company was ready to pay the damages up to Rs. 1.25 lacs, and Manish was asked to pay off the remaining amount from his own pocket. He was very frustrated since his car was covered under a Comprehensive Cover and enquired about his coverage policy with his financial advisor. The response that he received was that Rs. 50,000 has been deducted by the Insurance company towards depreciation.
Could Manish have saved this Rs. 50,000 by buying Zero Depreciation Policy?
As on date, how many of us are aware of the Zero Dep Policy, which covers your entire claim and gives you complete peace of mind?
Standard Comprehensive Cover in Car Insurance?
In a Standard Comprehensive Cover, Insurance companies pay the claim amount after evaluating the current value of your vehicle. Depreciation plays a major role here. The depreciation percentage varies for different parts of the vehicle like 50% depreciation for tyres & tubes, 30% for fibre glass etc. The claim amount is calculated after doing some complex calculations for depreciation.
You do not get the full amount of claim in this type of cover. Chances are that 75% of your claim will be paid by the Insurance company and you need to pay the remaining 25% of the claim on your own.
What is Zero Depreciation Policy in Car Insurance?
In Zero Depreciation Policy, the full amount of damage is covered. There is no depreciation on the value of parts of the vehicle i.e. depreciation is not factored in Zero Depreciation Policy. The full claim amount is settled.
ZERO DEPRECIATION CLAIM-HDFC ERGO
The Policy pays the full claim without any deduction for depreciation (excludes tyres and batteries) applicable on the own damage section. However, depreciation for parts excluded under India Motor Tariff is payable.
- Minimum out of pocket expenses
- No concern about categorisation of parts
The premium amount on Zero Dep Policy is higher than normal Standard Cover. Premium can be higher in the range of 20-25% than the Standard Cover.
Suppose a mid-segment car is insured for Rs. 35,000 under Standard Cover. For a Zero Dep Policy, you will need to shell out additional Rs. 7000-8000 from your pocket.
Restriction on Number of Claims and Age of Car
There is a limitation on the number of claims you can file in a year for Zero Dep Policy. Most of the insurance companies restrict it to 2-4 claims per year. The primary reason for the restriction on number of claims a customer may file per year is that a customer may file claims for even small scratches or dents in the vehicle and there can be unlimited number of claims.
Similarly, you cannot buy a Zero Dep Policy for your 10-year-old car. It is not advisable to pay a higher premium for an old car.
Insurance companies generally tend to restrict the Zero Dep Policy to new cars or cars that are less than 4 years old.
Will you buy Nil Depreciation Policy?
- Zero Depreciation Policy can be good for high-end and mid-segment car owners as the claim amount can be substantial in case of damage.
- Zero Depreciation Policy can be good for even small segment car owners as the cost of insurance will be higher only in the range of Rs. 2000-2500.
- Zero Depreciation Policy can be good for new drivers (who have bought a new car), since the chances of damages are high.
- Most importantly, Zero Depreciation Policy gives you complete peace of mind.
I am sure, not everyone may be aware about this product. Let’s share it with our friends and well-wishers, so that your near and dear ones are financially well covered.