Every car and every car part is prone to depreciation. Depreciation means the decrease in value over time. Just like any other product, as cars get older, they tend to decrease in value. So, when a claim is made in a car insurance policy, the insured gets the reduced amount for the affected part as the ‘depreciation’ is already factored in the calculation. However, the best car insurance comes with ‘zero depreciation’ cover that assures the insured of the full claim amount, wherein the depreciation amount is not deducted. It usually applies to parts made of rubber, fibre, and metal.

Under normal circumstances, when a car insurance claim is made, the insurance company does not give out the full sum assured. This is because the insurer takes into account the ‘current value’ of the parts that are damaged or need to be replaced. It basically means that the insurer will give you the sum assured of your car insurance policy, after considering the decrease in amount that is incurred over time.

A zero-depreciation cover is also known as Bumper to Bumper car insurance or a Nil depreciation cover. What this add-on cover does is that it covers the difference that exists between the market value of the new part and the market value of the depreciated part. This means that the insured gets the full sum assured for the damaged/replaced part without the cost of depreciation deducted, unlike what you’ll get even if you had comprehensive car insurance. The coverage offered is for parts made from rubber, metal, and fibre, it however, does not cover consumables, oil changes and any sort of mechanical breakdown. The zero depreciation cover can be bought at roughly 15-20% the cost of the standard premium.

There are some things which need to be kept in mind before opting for this add-on cover. Here are a few of them:

You cannot go to the garage for every single dent or damage that your car encounters. This is so because there is a cap on the number of claims that can be put in a year. This condition is necessary to prevent the insured from coming to the workshop for even the smallest repair jobs. Hence, ensure that you only take the car for when it is in need of big repair work, or the amount is more.

The zero depreciation cover is only applicable for new cars, which are essentially cars that are not more than 5 years old. However, this is not fixed and some insurers also offer this cover on cars older than 5 years. Even from the customer’s point of view, this approach makes sense, as the cost of premium won’t be enough to justify coverage of an old car.

Opting for a zero-depreciation cover for your car insurance policy comes with its benefits, but at a cost. As mentioned earlier, the premium for the cover can cost anything between 15-20% of the standard premium, and is therefore not for those searching for cheap car insurance. Then there are also factors that affect car insurance premium such as model of the car, age of the car and location of the car.

It makes sense for people who live in urban areas with a high density of vehicular traffic, where the cars are more prone to accidents. This cover is also cost-effective for those who own expensive luxury cars that are equipped with expensive spare parts. New drivers, or people who are not confident at the wheel, also need to consider buying this add-on cover. Consider availing a car insurance policy that offers a Zero Depreciation Cover, to ensure adequate coverage for your vehicle.