What does car insurance with depreciation cover?

When it comes to car insurance, no one wants to file a claim after an accident and find that the payout isn't enough because the car has lost value. Many people who own cars have to deal with this problem, which can mean big costs during fixes.

A depreciation cover proves beneficial in this situation. It ensures that your claim isn't reduced due to the car parts' age or wear. We'll explain what depreciation cover is, what it covers, and how it can help you when you need your insurance the most.

What does " depreciation cover" mean?

You can add depreciation cover to your comprehensive car insurance package if you want to. It makes sure that if there is an accident or fix, the insurance company will pay for all the new parts without taking into account how much they have lost value.

When you make a claim, insurance companies usually figure out how many parts—like metal, plastic, rubber, fibre, or plastic—have lost value over time before they pay you back. Because of this, the amount of your claim is lowered, and you have to pay the extra.

Zero depreciation (or "zero dep") cover eliminates this loss. You get a full claim settlement for the cost of replacing the parts, as long as the insurance terms allow it.

What does depreciation cover in car insurance include?

If you want to know what car insurance with depreciation cover includes, here it is:

1.    Parts made of plastic and fibre

These parts are usually written off at a very high rate, sometimes up to 50%. These charges are taken away when you have depreciation cover. Things like bumpers, mudguards, trims, and panel fittings are part of this.

2.    Parts made of steel and rubber

Things like wiper blades (partial), door seals, and engine mounts usually lose a lot of value. Depreciation cover reimburses you for these parts without deducting any depreciation costs.

3.    Parts made of metal and sheets

Even though metal parts lose value less (10–30%), the difference in claim value can still be big. Depreciation cover makes sure that these parts are fully compensated.

4.    Painting and covering

Any painting or refinishing of body parts is included at the full cost, instead of lowering the value of the paint by a percentage.

5.    Window glass and windscreen

These parts, like window glass and windscreen, already have no depreciation under standard plans. However, depreciation cover ensures this benefit is maintained along with full coverage on all other eligible parts.

6.    Changing a body panel

If you need to replace any of these parts due to an accident, you'll get a full refund.

It's important to keep in mind that zero-depreciation doesn't change what your basic comprehensive insurance covers. It just makes sure you get the full value of the parts, with no deductions for age or use.

What doesn’t it cover?

Depreciation cover has many perks, but it doesn't cover everything. It excludes one or two items:

1. Breakdowns of machines that aren't caused by an accident

2. The damage that comes from daily use, like worn-out tires and brake pads

3. Items that you use up quickly, like engine oil, coolant, nuts, and bolts, unless you have an add-on for these things.

4. Water getting into the engine can damage it unless you have engine safety cover.

5. Claims over the limit: Some insurers may place a limit on the number of zero depreciation claims allowed per year. It’s best to check your specific policy document.

6. Vehicles older than the qualifying age range: For cars up to 5 years old, there is usually no depreciation (but this can change).

Always carefully read your policy language and ask your insurance company to explain what it covers and what it doesn't cover.

For whom you choose should depreciation cover?

Depreciation cover is helpful for the following:

1. People who own new cars: The parts are worth more because the car is younger, and without this cover, you lose more money because the car depreciates.

2. First-time car owners: People who don't know much about claim reductions may like how easy it is to get full-value payouts.

3. People who own luxury or pricey cars should know that replacing parts on them is much pricier.

4. For city cars, this add-on is more useful because of the heavy traffic and higher accident risk.

5. People who are planning long road trips or who move a lot: Frequent use can lead to increased wear and tear, resulting in potential damage and insurance claims.

What does it mean for claims?

What does it mean? Let's look at an example:

There was a small accident involving you. Say your repair bill comes to ₹40,000. Without depreciation cover, you could lose 20 - 50% of the claim amount due to depreciation on parts like plastic or rubber. With zero dep in place, you’d likely receive the full ₹40,000, saving you a significant out-of-pocket expense. This results in a lot of savings and a greater sense of peace of mind.

Does it make the premium go up?

Yes, just a little. However, this minor cost is justified by the significant increase in claim value. The price of this add-on changes based on:

●       The year and type of your car

●       Location in the world

●       History of past claims

●       Total Declared Value (IDV) of the Insurance

But for many policyholders, the extra payment is more than worth it because they might save money when they need to file a claim.

Protect yourself as much as possible

For those who have asked, "What is depreciation cover?" The short answer is that it protects you from unexpected costs. It makes sure that you don't have to pay a lot of depreciation fees if something goes wrong.

Zero depreciation is one of the best add-ons you can get, whether you're buying a new car, insuring a high-end car, or just want more value from your insurance.

In the end, good car insurance should not only fix your car but also keep your money safe.