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How is Zero Depreciation Calculated in Car Insurance?

As explained in the previous article Depreciation is defined as the decline in the price or value of the product over a period of time. In car insurance depreciation cover the depreciation is calculated on the basis of the age of the vehicle and the damaged part.

Insurance Regulatory and Development Authority of India (IRDA) has specified the depreciation rates which are to be considered while settling the claim.

  1. For all rubber, nylon, plastic parts, tyres and tubes, batteries and air bags- 50%
  2. For Fibre glass components - 30%
  3. For all parts made of GLASS - NIL
  4. Rate of Depreciation for all other parts (apart from the above mentioned) including Wooden parts will be as per below table
  5. Age of the vehicle Percentage 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 10years 40 %
    Exceeding 10 years 50 %
  6. Rate of Depreciation for Painting: In case of painting, the painting charges calculated are different for different companies.

Benefits of Zero Depreciation Car Insurance

Save Money

Zero Depreciation add-on covers help save more money for customers as without Nil depreciation customers have to shell out more money for the claim. The cost of depreciation of parts is to be borne by the insured if the Zero Depreciation cover is not opted for. But with a 0 Depth car insurance cover the cost of depreciation will be reimbursed by the insurance company.

Higher Claim Amount

Opting for the Zero Debt car insurance helps the insured get higher claim amount compared to that of claim amount with comprehensive cover. The amount for depreciation can form a considerable portion in the overall claim amount.

Less Investment More Coverage

The premium paid for Car insurance Zero Depreciation Cover is quite less compared to the coverage it offers. The premium for Zero depreciation in car insurance would normally be a percentage of comprehensive premiums. So more coverage can be obtained by paying fewer premiums. Zero dep car insurance premium calculators are used to arrive at the premium.

Factors Affecting Zero Depreciation Car Insurance Premium

Following are few factors which affect the Zero depreciation car insurance premium:

  1. Age of the Car: In motor insurance the zero depreciation is directly related to the age of the vehicle, same is in case of Car insurance. Zero depreciation premium increases with increase in the age of the car. Normally Zero depreciation is offered for vehicle age up to 5 years while some companies are offering up to 7 years of car age.
  2. Make & Model of the Car: The zd in car insurance premium depends on the Make as well as Model of the car. If the cost of replacement of a part is higher for a model then the premium also would be higher. Therefore the kind of car you have will decide the 0 dep car insurance premiums.
  3. Area of Usage: The area of usage of car also plays an important role in determining the Zero depreciation premium in car insurance. Every city has the different rate of risks associated with it and therefore different level of premium for different risks.

For Zero Depreciation Car Insurance calculation can be done using the portal where almost all the car insurance companies are offering their services.

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