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Know about Zero Depreciation in Car Insurance.

The rising repair costs for a car has made customer think twice before purchasing only comprehensive insurance. To escape the logic of payment for depreciation from ones pocket customers have started opting for nil depreciation or Zero depreciation insurance.

This add-on goes by different names in the market such as Nil Depreciation, Zero Depreciation or Bumper to Bumper cover. In this article let us understand what is the Nil depreciation cover in car insurance and bike insurance.

The word depreciation is derived from the Latin word “Depretium”. In which “De” means decline and “pretium” means Price. So, zero depreciation car insurance meaning is the decline in the value or price of the fixed asset over a period of time due to wear and tear.

It is important to know what zero depreciation in car insurance and bike insurance is, as this add-on plays a crucial role at the time of claim settlement. As it is known that each and every part in a car undergoes wear and tear due to its usage over a period of time. This wear and tear results in the depreciation of the part which means that the value of the part is reduced by each passing day.

How does Zero Depreciation work?

Zero depreciation cover should be opted while purchasing the motor insurance policy itself. It is not possible to incorporate the zero depreciation cover once the policy period starts. This is done to avoid any undue advantage to be taken by the insured in case of any claim.

Now let us understand the way Nil depreciation or Zero dep car insurance works in the normal scenario.

For example let us assume that Mr.X has purchased Zero depreciation car insurance cover on 1-Jan-2020 for his vehicle registered on the same date. While driving his vehicle on a highway in the monsoon season he met with an accident due to the fog on 11-Sep-2020 and has registered for claim.

After the survey the claim amount was arrived at Rs.1, 20, 000/- including all the repairs for the damaged parts. The depreciation amount was arrived at Rs.30, 000/- which would not have been paid had the insured not opted for the Zero dep car insurance cover.

So now the insured will be paid the claim amount after deducting the Compulsory Deductible and salvage charges if any.

In the same example if we assume that the insured had not opted for car insurance zero depreciation cover, the depreciation amount of Rs.30, 000 had to be borne by the insured. In short the zero depreciation car insurance cover safeguards the interest of the insured in increasing the claim amount payable and reducing the burden on the insured.

Conclusion:
It is hereby advised to the insured that it is in the interest of the customer to select the Zero depreciation bike insurance and zero depreciation car insurance. In some companies the zero depreciation car insurance after 5 years is not available due to the fact that the depreciation percentage after 5 years is higher owing to the fact that the wear and tear of vehicle is higher after 5 years.

For the same reason in almost all the companies the zero depreciation bike insurance after 3 years is not available. So, it is advisable to purchase zero depreciation car insurance for 5 years and zero depreciation bike insurance for 3 years.

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