Motor insurance has become a need of the hour today, with new models of automobiles launching, even in the EV space. Experts say it becomes crucial for a person to buy motor insurance along with the possession and pride of a new vehicle since a comprehensive policy protects car owners from repairs due to accidental damage or mishaps.
If that is not enough of a reason, the Motor Vehicle Act, of 1988, obligates that all car owners in India must have valid car insurance for at least liability-only coverage.
Parag Ved, President, and Head of Consumer Lines, Tata AIG General Insurance says, “With the advent in sales of luxury and sports cars, having insurance today is recommended. As an incentive to buy motor insurance, zero-depreciation motor insurance is an add-on cover that ensures complete coverage while negating the impact of depreciation on the car.”
Car is a depreciating asset and this would certainly have an impact on the value of the insurance purchased. Depreciation is the devaluation of an asset due to factors such as natural wear and tear, usage, and obsolescence.
The depreciation rate for all vehicles has been prescribed in Indian Motor Tariff and is a part of policy terms and conditions as under;
|Subject to a deduction for depreciation at the rates mentioned below in respect of the parts replaced|
|1. For All Rubber/ Nylon/ Plastic Parts, tyres, tubes and batteries||50%|
|2. For Fibreglass components||30%|
|3. For All Parts made of Glass||NIL|
|4. The rate of depreciation for all other parts including wooden parts will be as per the following schedule|
|Age of the vehicle||% of Depreciation|
|Not Exceeding 6 months||NIL|
|Exceeding 6 months but not exceeding 1 year||5%|
|Exceeding 1 year but not exceeding 2 years||10%|
|Exceeding 2 years but not exceeding 3 years||15%|
|Exceeding 3 years but not exceeding 4 years||25%|
|Exceeding 4 years but not exceeding 5 years||35%|
|Exceeding 5 years but not exceeding 10 years||40%|
|Exceeding 10 years||50%|
|5. Rate of depreciation for painting: In the case of painting, a depreciation rate of 50% shall be applied only to the material cost of total painting charges. In case of a consolidated bill for painting charges, the material component shall be considered as 25% of the total painting charges for the purpose of applying the depreciation.|
How does it benefit?
Zero Depreciation Cover is an add-on cover that can be purchased with the package policy on payment of an additional premium, this cover ensures the insured receives the full amount on the damaged or replaced parts of his/her motor vehicle in case of accidental damage which generally gets depreciated as per policy terms and conditions. Ved points out, “With the Zero depreciation cover on your side the depreciation value of damaged parts won’t be deducted from the claim amount.”
For instance, certain depreciation reimbursement add-on cover applies to vehicles for up to 05 years. For personal cars, it also gets extended up to 7 years provided there is NCB in the policy. The standard offering is the first 2 claims during the policy period, however, policyholders have the option to choose 3, 4 or unlimited claims on payment of an additional premium.
Ved explains, “A zero-depreciation cover is best suited for car owners who want to reasonably utilize their insurance and not waste money on the depreciation of car parts.” A zero-depreciation cover applies to vehicles that are less than 5 years old and the policyholder can avail of it twice during the policy tenure.
He further adds, “This add-on-cover can be best used by New Car Buyers, Sports Car Buyers, Luxury Car owners and Car owners in accident-prone areas.”