In India, nearly 95% of car owners prefer motor insurance with zero-dep coverage, indicating the importance of this rider despite requiring only a minimal additional premium.1 While zero depreciation cover is one of the most popular riders, it is typically available for cars that are up to 5 years old. So, does that mean that the day your car turns 5, you’ll lose eligibility for zero dep cover?
Well, that depends on the condition of your car and the insurance company. There’s no denying that zero depreciation coverage for vehicles beyond 5 years is also crucial. Let’s dig a little more.
Everything You Need to Know About Zero Dep Beyond 5 Years
Zero depreciation insurance is usually an additional coverage that vehicle owners can add to their existing car insurance policy. This protects the vehicle owner against deductions due to the depreciating value of the vehicle that the insurer makes while settling claims. Here are a few crucial aspects of zero dep that you must know:
1. The Concept of 5 Year Cut-Off
The concept of a year cut-off in terms of motor insurance is considered by insurance companies for various reasons. Firstly, older cars tend to have a higher likelihood of breakdowns or failures, which often results in increased claims under motor insurance plans. Secondly, vehicles that are more than five years old often tend to have a significantly low resale or IDV (Insured Declared Value).
In these situations, if the insurer doesn’t analyse the depreciating value of the vehicle, there are high chances that they end up paying for claims that are either close to the vehicle's market value or even exceed it.
2. Importance of Zero Dep For Your Vehicle
Typically, under a car insurance policy, the insurer deducts depreciation costs from the settlement amount before paying a claim. These costs are often applied to materials such as metal, rubber, and plastic. In the absence of zero depreciation coverage, the insured has to pay a significant amount out of their own pocket. However, with zero depreciation coverage, the insurer does not deduct any depreciation cost.
Let’s take the example of Smriti Mandana; the repair cost for her vehicle was estimated at around ₹ 50,000. If she had not opted for zero depreciation coverage, her insurer would have deducted depreciation cost for certain parts of the vehicle.
3. Zero Dep Beyond 5 Years
Unlike earlier, many insurance companies today offer zero depreciation beyond five years, which typically extends to seven. While this appears to be a promising policy on the surface, it also has certain drawbacks. Such insurance policies come with significantly high premiums and are available only under certain special conditions.
Additionally, the renewal rules and eligibility requirements for this type of policy differ from those of your regular motor insurance plan, making it a tedious task to apply for and obtain approval.
Pros and Cons of Paying that Extra Premium for Zero Dep
Purchasing zero depreciation car insurance policies has both pros and cons that you must evaluate before making a decision. Here are some cons and pros of zero depreciation policies:
Benefits of zero depreciation policies
- The insurer offers a higher claim settlement amount because depreciation deductions are not applied.
- You can save a lot of money while raising a claim, as the out-of-pocket expenses are minimal.
- The coverage is ideal for high-value and well-maintained vehicles.
- You can enjoy a better peace of mind knowing that even during an emergency, your finances are not drained on getting your vehicle repaired.
Drawbacks of zero depreciation policies
- Zero depreciation insurance is an additional coverage option on an existing policy, so you will need to pay an extra premium.
- The premium cost is typically higher for this coverage.
- You may still need to pay some money for raising claims for consumables.
- The eligibility and verification process is usually tedious.
Enhance the Coverage with these Riders
Car insurance plans in India offer a long list of riders that you can add to the policy to protect your vehicle against depreciating market value. Here are some options to consider:
Engine Protect is a rider that offers financial protection against damage done to the vehicle's engine and related parts.
Typically, a motor insurance plan does not offer coverage for consumables. A consumable coverage is an added benefit that protects you from paying the cost of consumables during the repair or servicing of your vehicle.
What are consumables? Consumables are those parts that usually have no re-use value, like nuts, screws, grease, lubricants, etc.
A return to invoice cover ensures that you are protected with the original IDV of your vehicle in the event that it is stolen or damaged beyond repair.
What is IDV? IDV is an insured declared value that is evaluated at the time of purchasing the insurance plan.
Tips to Choose the Right Motor Insurance
Always remember that when it comes to choosing new car insurance, one size doesn’t fit all. Here are some tips that you must bear in mind while picking a plan
Explore and Compare Polices
There are a large number of car insurance online policies available in the market that you must explore and compare to find one that is most suitable for your vehicle's needs and comes at an affordable premium. Generali Central offers a wide range of plans that work for the specific needs of different car models.
Understand the Claim Limits
Claim limit is the maximum amount your insurer promises to pay when you raise a claim for any of the covered services. This is why it is essential to understand the claim limits in relation to the vehicle you drive, the city you drive in, and the frequency of using your vehicle, among other factors.
The premium for four wheeler insurance is decided based on different factors. As a policyholder, it is essential to ensure that your motor insurance plan strikes a balance between the premium you are paying and the expected repair costs for your vehicle.
Before you buy car insurance, read this comprehensive blog and ask yourself some basic questions.
Closing Note
When purchasing a motor insurance plan, it is essential to evaluate various aspects of it. Zero depreciation car insurance after 5 years in India is a step you take today to protect the long-term value of your vehicle. Similarly, riders such as return-to-invoice, engine protection, and consumables coverage are shields for your vehicle. However, it is essential to first explore and compare policies and evaluate the premiums before deciding on the best car insurance plan online.
