When we talk about depreciation, we mean loss in value of an asset over some periods of time due to factors such as wear and tear, age, and obsolescence. Automobile are asset that depreciate over long period of time, unlike land which appreciate over time. For instance, a new vehicle will cost more than an older vehicle. There is a certain depreciation which is associated with the materials which the car is made up of such materials includes, glass, plastic, metal and other materials. All the parts assembled on a vehicle have different rate of depreciation. however, a zero depreciation car insurance covers such loss.
When an accident occurs, if your car is damage, recovering the entire expense may be difficult for you to when it comes in terms of spare parts replacement. The general insurance company will only pay for the parts which are seriously damaged. The insured individual will have to pay for the difference between the market value of both the new parts and the depreciated part of the car.
However, it will be a great idea for an individual to avail zero depreciation car insurance. After the help of it, you will gain maximum reimbursement during the time of claim.
What is zero depreciation car insurance cover?
A zero depreciation car insurance helps to provide coverage to a car against all physical damages caused to the car without tracing the element of depreciation. Although some standard motor insurance policy may cover some losses arising in case your vehicle is stolen or damage when you file for a claim settlement, the compensation is received after a standard deduction of appreciation is made on the vehicle spare part.
However, a car insurance with a zero depreciation can give you the entire compensation amount. A zero depreciation add-on cover can be availed brand new cars. In this policy, the whole amount claimed is being paid by the car insurance company regardless of the rate of depreciation on the value of the car.
Benefits of a zero depreciation car insurance cover
- For zero depreciation car insurance, most of your claims regarding the insured parts are settled without considering the depreciation amount.
- Zero depreciation car insurance helps reduce out-of-pocket expenses since they don’t consider depreciation cost while filing for a claim settlement.
- It increases the value of the basic automobile insurance coverage and makes your entire investment nil. With this cover, you can have a complete peace of mind.
Zero depreciation cover Vs regular car cover
Without much adobe, let’s look at the major differences between a zero depreciation car insurance and normal car insurance.
- Premium – a zero depreciation car cover pays higher premium than a normal car insurance cover.
- Repairing costs – repairing cost of spare parts like glass, fiber, plastic and rubber are borne by the insurer in case of the zero depreciation cover while the repairing cost of are borne by the insured in a normal car insurance.
- Age of the vehicle – a normal car insurance cover is meant for cars older than 3 years while a zero depreciation car insurance cover is meant for only brand new cars.
Factors to consider before opting for zero Depreciation cover
While opting for a zero depreciation cover, there are important points to consider while.
- Consider the age of your car – the zero depreciation car insurance policies is applicable to cars below 3 years. These implies that only new cars are required for zero depreciation cover.
- Compared to regular car insurance policy, the premium for a zero depreciation car insurance will be a bit expensive. It’s not wise to pay high premiums for vehicles older than 3 years. If you live in high risk area or own a luxury car, it’s advisable you opt for zero depreciation car cover add-on because anything could happen in future. A zero depreciation policy is based on only 3 main factors:
- Age of the vehicle
- Model of the vehicle
- Your location
Who should buy zero depreciation cover?
Below are the sets of individuals who should opt for a zero depreciation car insurance cover;
- People with expensive cars
- People with brand new cars
- People living in an area that is prone to accident
- New car drivers
- If you worry about small dents and bumps
- If the spare part of your car is expensive.
The zero depreciation car insurance cover is best for new or inexperience car drivers because they are more prone to damage their car.