Why Is It Important to Purchase a Zero-Depreciation Add-On to Your Car Insurance Policy?

Why Is It Important to Purchase a Zero-Depreciation Add-On to Your Car Insurance Policy?

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Car insurance is a compulsory requirement for owning a car. This requirement is in addition to the registration process stipulated by regulations. Without a car insurance plan, not only does one attract legal fines, but also liabilities for damages to others and their car. Thus, making the right choice of car insurance plan is critical.

Car insurance plans are available in two types—a third-party cover or a comprehensive policy. A third-party program or alternatively known as a liability-only policy, is the one that safeguards you from liabilities arising due to an accident or damages. With no coverage for the damages to your car, a comprehensive plan is a better alternative than such a third-party policy. However, comprehensive plans, although broader in their scope, have their share of limitations. One such limitation is the impact of depreciation.

Car Insurance

Depreciation is an element of time that impacts the value of your car. The wear and tear in use also contribute to your vehicle’s deprecation. At such time, when a claim is raised, the insurance company accounts for such depreciation on your car and lowers the compensation amount. It is a standard practice to record such depreciation in comprehensive plans at pay-out. However, using the zero-depreciation add-on, you can bypass any reduction of your insurance claims.

What is a zero-depreciation cover?

Like other add-ons, a zero-depreciation add-on is an optional insurance cover you can purchase with your car insurance policy to eliminate any impact of depreciation. It is also known as a bumper-to-bumper cover or nil depreciation add-on. Using the zero-depreciation facility, you can ensure enhanced compensation for all claims made for repairs. However, there’s a catch. Not all amount is covered in a zero-depreciation plan. The amount of deductible and any consumables is something that you shall be required to pay even when you load a zero-depreciation cover. * Standard T&C Apply

Why is it essential to buy a zero-depreciation add-on?

Since depreciation is a phenomenon that all motor vehicles are subject to, it substantially lowers the claim amount. But when you opt for a zero depreciation cover, the policy offers compensation for all replacement parts and, in effect, results from a higher pay-out with reduced out-of-pocket expenses. Here’s an example to explain how zero-depreciation cover benefits:

Mr. Ramesh met with an accident while returning from work. Since he had a comprehensive plan, he wasn’t worried much about the cost of repairs to his car. But to his surprise, he had to pay a substantial cost of repairs despite having a comprehensive policy. What Ramesh did not account for was the depreciation of his car. In the same scenario, if he had a bumper-to-bumper plan, his out-of-pocket expenses would have been restricted to the amount of deductible and any consumable spares required for the repairs. Thus, offering more comprehensive coverage. * Standard T&C Apply

One thing to remember when buying a zero-depreciation plan is that since it is an optional add-on, it increases car insurance prices. Hence, keep in mind when purchasing one. With the benefits a zero-depreciation plan offers, make sure to check for its inclusion in your car insurance renewal. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

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