Third-party insurance is mandatory for all those who own a motor vehicle. While it does not cover the expenses incurred to your own vehicle, it covers the costs and all legal liabilities you have to bear for an accident caused by you. This includes any damage repair, physical injury and/or death of the third party.
A comprehensive car insurance policy comes with a list of required coverages, yet includes several add-on packages to ensure all liability scenarios are covered. However, it is important to proceed with caution and avoid selecting packages that are not necessary.
Depreciation and Motor Vehicles
Every physical asset is bound to lose its value over time. For eg., if the value of your mobile on the day of purchase was ?10,000, the value of the same mobile might depreciate to ?6000 after a year.
Regular usage of any product causes wear and tear, meaning decreased monetary value. Like every other asset, the price of your car falls with time. The value of a car decreases not only due to wear and tear but also due to the fluctuating rates of component materials like iron, plastic, steel, etc.
In fact, when you make an insurance claim, your insurer will first evaluate the depreciated value of your car after an accident.
What is a Zero Depreciation Insurance Policy?
Due to depreciation of a car’s value, during a claim, the insured does not receive full coverage of the car. Your insurer will subtract the depreciated amount from the calculated amount. Basically, you will receive whatever is remaining after depreciation.
If you buy a zero depreciation car insurance, you can claim maximum indemnity. It provides comprehensive coverage without any deduction pertaining to depreciation.
Types of Motor Insurance Plans
Normal or General Car Insurance: It is the regular motor vehicle insurance policy, wherein if you file a claim, the payoff amount depends on the present value of the vehicle.
Zero Depreciation Car Insurance: This insurance policy provides maximum coverage, without deducting the depreciation amount.
Features of a Zero Depreciation Car Insurance Cover
1. This insurance plan is also known as Nil Depreciation Insurance or Bumper to Bumper Insurance Cover.
2. It gives complete insurance cover without assessing and deducting the depreciation amount.
3. Your insurer bears the entire cost of settlement.
4. The premium is 15% to 20% higher as compared to the premium amount of a normal insurance cover.
5. It is suitable for new car owners.
6. Luxury car owners and people who drive cars in high-risk zones should go for this insurance plan.
7. The premium of a zero depreciation car insurance policy depends on the age, model and location of the vehicle.
8. This insurance plan can be taken for vehicles up to 5 years of age.
People who own a car over the age of 5 years too can opt for zero depreciation car insurance, but it does not seem feasible to pay a higher premium for an ageing vehicle. Hence, experts do not recommend this insurance plan for older cars.