Benefits of a Zero Depreciation Policy during Claims

Know How Zero Depreciation Policy Helps During Claim Settlement

While buying car insurance, you must have come across terms like “Zero Depreciation” or “Nil Depreciation” or “Bumper-to-Bumper Policy”. Many people are unaware of the “Zero Depreciation” concept and misconstrue it as just another kind of add-on cover that can be availed by paying an additional amount of premium on their car insurance policies. However, the zero depreciation cover is the most important add-on cover available, its benefits outweigh the extra premium paid.

Zero depreciation car insurance is actually an add-on cover that you may opt for while buying comprehensive car insurance plans. Having this cover relieves you of the impact of depreciation while making the insurance claim. This is because depreciation reduces the value of your car over a period of time. The effect of depreciation starts once you have bought the car and it impacts all features of the car body.

How does Zero Depreciation Cover help?

When you file a car insurance claim citing loss due to theft or complete damage of your car, the insurance company will not repay you the entire value of your car. Rather, it will take the depreciation factor into consideration during the claim settlement process.

Having a Zero Depreciation Policy in place ensures that the policyholders are able to avoid the impact of depreciation. The insurance companies are liable to pay for the complete cover while leaving out the depreciation factor from the insurance coverage amount. The importance of paying an additional amount for this add-on cover is realised in the event of complete damage of your car during an accident or any other unfortunate event. As opposed to deducting the depreciation amount on tyres, batteries or any other portion of the car, the insurer will be repaying the amount equal to the cost of the car’s entire body replacement in case of zero dep cover is present.

Exclusions under Zero Depreciation Policy

While complete coverage of all the body parts without reducing depreciation is available under this policy, it does not secure against damage caused to the car’s engine owing to water-logging or oil spill. Moreover, this policy does not cover any damage caused due to mechanical breakdown, change of oil or any consumable portion in the car. As per the policy, you are entitled to only a limited number of claims during the policy tenure.

How much does Zero Depreciation Cover cost?

Policyholders are required to pay an added amount of not more than 15-20 per cent of the original premium charges to get this cover. Moreover, this cover can only be availed by policyholders with cars that are less than five years old.

Should you opt for a Zero Depreciation Cover?

Choosing an add-on cover is a sound decision and provides innumerable benefits.

There is certain guideline under which the zero dep add on can be purchased which include:

• The cars should not be more than five years old.
• The policyholder has insurance for their luxury cars.
• The policyholder does not have much driving experience.
• The policyholder is living or driving in accident-prone areas.

With so many benefits available at such nominal rates, every penny spent on buying this cover is surely worth the price.

Overview

To conclude, the zero depreciation cover or the bumper to bumper to bumper cover is not just another add-on cover. It is the most important one offered by insurance providers. Since it mitigates the cost of the depreciation of the car at the time of settlement. This makes the claim amount significantly higher and disproportionately higher than the cost of the cover as well. Thus purchasing or not purchasing this add-on cover can make a significant difference to the insurance holder in a time of crisis. It is also crucial to keep in mind, that though the add-on cover has several benefits, it is not meant for everyone. Firstly it can be availed only by cars that are less than 5 years older. Secondly, it makes more sense for people who have luxury cars, cars that have expensive spare parts or drivers that are new to driving or inexperienced. Thus, though the zero depreciation cover is beneficial it may not be the right fit for everyone.

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