Team AckoAug 11, 2021
Vehicle insurance is a slightly technical topic. Thus, it is natural that some people find it difficult to understand its nuances. To add to the complexities, there’s a lot of misinformation surrounding car/bike insurance and related terminologies. For example, there are some common misconceptions about the Zero Depreciation Add-on. This article is all about resolving such misconceptions so that you have a clear idea about the Zero Depreciation Add-on.
The Zero Depreciation Add-on considers the vehicle’s depreciation factor as ‘zero’ while settling claims. As a result, the claim amount you receive from the insurer is higher as compared to the amount without it.
For example, if the vehicle’s repair bill comes to Rs. 30,000, the depreciation amount would be Rs. 3,000. Thus, the claim will be settled for Rs. 27,000 after deducting depreciation. However, with this add-on, the depreciation amount would be considered nil and the claim will be settled for Rs. 30,000.
(Note that the above example is mentioned to explain the concept and does not convey the actual claim settlement calculation.)
Here’s a list of misconceptions about a Zero Depreciation Cover in Car/Bike Insurance.
While repairing a car, the garage uses several consumable items such as nuts and bolts, oil, etc. The cost of such items is not covered under by a car insurance policy unless you have a Consumables Add-on. Such cost is not covered under the Zero Depreciation Cover.
Just like the Consumables Cost, the cost of Deductibles is also not covered under this plan. Thus, in case of a claim, you need to warrant for the Compulsory Deductible aspect of the policy. It is a pre-decided nominal amount that is supposed to be taken care of by the policyholder in case of a claim.
There can be a limit to the number of times you can claim against this plan during a policy period. The common limit is twice but it can vary. There can be no limit as well. For example, as of now, ACKO does not have such a limit but it might change in the future. Thus, it’s best to go through the Policy Wordings at the time of buying the cover to know the claim limit under the Zero Depreciation Cover.
If you have a 6-year-old car and you want to insure it with a Zero Depreciation Add-on, then you might find it difficult to do so. Most insurers do not offer this add-on for cars that are more than five years old.
Just like other car insurance add-ons, the Zero Depreciation Add-on also comes with exclusions. Usually, it does not cover the following aspects of an insured vehicle.
Damage due to mechanical breakdown of a vehicle
Regular wear and tear
Damage due to oil leakage or water ingression
Damage to the uninsured parts like a gas kit, bi-fuel kit, etc.
Zero Depreciation add-on is applicable for both cars and bikes. At the time of buying or renewing your vehicle’s insurance policy, you can choose this add-on cover along with the Comprehensive Plan.
Also, read: Return to Invoice vs. Zero Depreciation
Zero Depreciation Cover is an essential add-on to deduct your expenses while settling a claim. Before buying this add-on, get clarity about the misconceptions. Burst those Zero Depreciation Cover myths by going through the Policy Wordings, reading blogs, or speaking with the Customer Care team before buying this add-on.
Here’s a list of common queries about this add-on.
Why should I buy a Zero Depreciation Add-on?
When you buy this add-on along with a Comprehensive Policy, your insurer will not consider the depreciation factor while settling claims. This way, you will receive a better claim pay-out.
What is IDV in Zero Depreciation a car insurance policy?
Insured Declared Value (IDV) is commonly understood as the current market value of the vehicle. It is the amount you are entitled to receive from your insurer as claim settlement in case of total loss (damage beyond repair or theft).
Till what period can I purchase a Nil Depreciation cover for my car?
Usually, this add-on is available for vehicles up to 5 years of age.
Can I make multiple claims during the policy period if I have the Zero Depreciation Cover?
Most of the insurance companies limit the claim number to two in a policy period. For example, at ACKO, as of February 2021, there is no such limit but it might change in the future. Do check with your insurer to understand more on how many claims you can raise with this add-on cover.
Does the Zero Depreciation cover damage due to wear and tear?
No, the Zero Depreciation add-on cover excludes regular wear and tear of the car. This cover also excludes mechanical breakdown, engine damage caused by water ingression, and oil leakage of a vehicle. It is suggested to go through the inclusions and exclusions of this add-on before purchasing it.
Am I allowed to buy this add-on as a stand-alone plan?
No, add-ons cannot be purchased as standalone covers. They are not available with a Third-party Car Insurance Policy and need to be purchased along with a Comprehensive Vehicle Insurance Policy.
Does the cost of this add-on vary from one insurer to another or is it the same like the Third-party Cover?
The Third-party Cover’s premium is stated by the Insurance Regulatory and Development Authority of India. Whereas the premium for add-ons is stated by the insurance company. Different insurance companies might charge a different amount for the add-ons offered by them.
Can I buy this add-on for a trial period and then decide if I want to continue with it or not?
You can buy this add-on for a year and then decide if you want to continue with it or not while renewing the policy. There’s no trial period.
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