Delhi-based Suresh Mehra had duly filed for an insurance claim when his new car met with an accident recently. However, he got furious to learn that instead of getting a compensation of Rs 50,000 towards the damages, he was paid 20% less by his insurer. After all, he had taken a comprehensive car cover and was sure that the insurance company will pay him the entire cost of damage. However, that didn’t happen and he got the claim compensation after a standard deduction of depreciation. Mehra later learned that that would not have been the case had he opted for a Zero Depreciation Cover.
What is Zero Depreciation Cover?
Zero Depreciation Cover, also known as Bumper-to-Bumper Cover, Nil Dep or Depreciation Waiver, is an add-on cover which preserves the value of your vehicle without considering any depreciation. It provides a complete cover to your vehicle without factoring age-related or damage-caused depreciation on the value of parts replaced. Thus, in case of an accident, this cover saves you from shelling out a good amount from your own pocket, which you may have had to pay for replacing parts of your car.
What does it cover?
This add-on cover extends to the repairing costs of fiber, glass, rubber parts and plastic. It provides 100% of the cost of spare parts replaced due to accident-caused repairs.
It can usually be taken for relatively new cars (up to 5-year old) and be availed after paying 15-20% extra of the standard premium.
How is it different from a Standard Motor Cover?
In a Standard Motor Policy, the rate of depreciation ranges from 0% to 40%, depending on the age of vehicle and the type of material. Each of the materials or parts has a different rate of depreciation. “Hence in case of a claim under this policy, the customer needs to bear the cost out of his/her own pocket, while in the case of a Zero Depreciation Policy, no depreciation is charged. Thus, a 100% reimbursement on replaced or depreciated parts can be availed, leading to optimum benefits under the cover. However, in terms of premium, a Zero Dep Cover is little costly compared to a Standard Motor Cover,” says Rajiv Kumar, MD & CEO, Universal Sompo General Insurance.
Advantages of buying a Zero Dep Cover
The advantages of buying a Zero Dep Cover is that it offers a comprehensive protection for your vehicle, where the claim settlement is offered without considering the depreciation value. Hence, “the insurer bears the maximum cost in case of damage to the vehicle, unlike a Standard Motor Cover where the policyholder has to pay more out of his/her own pocket. In a Standard policy, the claim is settled based on the current value of the vehicle, whereas in case of a Zero Dep Cover, the claim is settled for the entire amount. This add-on cover provides high advantages to everyone considering the fact that it eliminates the possibility of any out-of-pocket expense from the owner and adds more value to the basic motor insurance cover,” says Kumar.
Who should buy it?
“If the policyholder wishes to cover 100% of the cost of spare parts to be replaced due to accident-caused repairs, one should consider and opt for this additional cover,” says S. Thirunavukarasu, Country Head Underwriting and Claims (Motor), Royal Sundaram General Insurance Co Ltd.
Moreover, new car owners, luxury car owners, people who worry about bumps & dents caused to their vehicle, new drivers, and owners of cars exposed to driving in accident-prone areas as well as premium cars with expensive spare parts should opt for a Zero Depreciation Cover. “The extra premium-bearing capacity also needs to be taken into consideration as this cover may cost slightly more compared to a Standard Motor Cover. Hence, it’s worthwhile buying a Nil Dep/Zero Depreciation add-on by any car owner who does not mind paying some extra premium,” informs Kumar.
How it can be bought?
While taking a Comprehensive Insurance Cover for the vehicle, “the customer can opt for this additional cover by paying additional premium along with the base policy premium,” says Thirunavukarasu.
Factors to keep in mind while buying a Zero Dep Cover
You need to consider several factors like the age of the vehicle, make and model of the vehicle and the location where the vehicle will normally ply. It is not advisable to opt for this cover for high-aged vehicles. Also, it is to be remembered that there is a restriction on the number of claims one can make in a year.