Many people choose zero-depreciation or normal insurance when purchasing a car. However, this coverage is not available for all vehicles. What exactly are zero-depreciation and normal insurance policies, who should take them, and what are their benefits? Learn more here.
Many people choose zero depreciation or normal insurance when purchasing a car. However, this coverage isn’t available for all vehicles. Agents often don’t explain the specifics, causing problems for car owners later. Therefore, it’s important to understand what zero depreciation and normal insurance policies are, who should opt for them, and what the benefits are.
What is zero depreciation?
Zero depreciation insurance is an add-on insurance. It covers all parts of your vehicle, whether made of plastic, rubber, fiber, or metal, at their full cost. This means that if a part is replaced after an accident, you’ll receive its full value. In contrast, with normal insurance, the insurance company pays based on the age of the part. The amount reduces further as the vehicle ages.
There’s a big difference between normal and zero depreciation insurance.
Normal insurance – As the vehicle ages, the claim amount decreases.
Zero depreciation insurance – Whether the vehicle is new or 5 years old, claims will always be paid at full value. However, keep in mind that most companies only provide this coverage for vehicles up to 5 years old. Some companies extend it to 7 years.
Suppose your car is involved in an accident and three parts are damaged.
Bumper – Cost ₹20,000.
Normal insurance will pay only ₹10,000 (50% deduction).
Zero depreciation will pay the full ₹20,000.
Side mirror – Cost ₹10,000.
Normal insurance will pay ₹6,000.
Zero depreciation will pay the full ₹10,000.
Headlight – Cost ₹10,000.
Normal insurance will provide ₹6,000.
Zero depreciation will provide a full ₹10,000.
This means that if the total loss is ₹40,000, normal insurance will provide only ₹22,000. Zero depreciation, on the other hand, will provide a full ₹40,000.
Who should consider this insurance?
New car owners, because damage to a car is more costly in the early years. Luxury car owners, because expensive parts can significantly reduce the claim amount. Those who don’t like extra expenses should also consider this. If you don’t want to lose a single rupee after an accident, this policy is best. While the premium for a zero depreciation policy is slightly higher, it provides significant savings on every accident.
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