Is Zero Depreciation Worth It for Cars Driven Less Than 5,000 km a Year?

Summary/ TL;DR:

The zero-depreciation option in car insurance provides a full claim payout regardless of the car's mileage, even if you drive less than 5,000 km annually. This is an ideal choice for new and luxury car owners. Having this coverage prevents the need to pay out of your pocket.

Introduction

Every year, your car's value will depreciate. This depreciation will affect the resale value. This depreciation is one of the key reasons why older cars cost less, even if they're a few months old. Depreciation increases each year and is likely to affect your insurance.

To protect against such expenses, you should get zero depreciation on car insurance. This is an optional add-on that does not deduct depreciation when settling accidental claims. It's advisable to get zero depreciation cover on car insurance even if your car has been driven less.

Should You Buy Zero Depreciation Even If Your Car Has Been Driven Less?

Even if you have driven fewer than 5,000 km a year, you should consider getting zero-dep cover. Although you pay a higher insurance premium, you get the benefit of full claim payout without depreciation for certain parts. This is especially beneficial for expensive cars or those with high repair costs.

As a low-usage driver with an old vehicle or low repair risk, weigh the benefits. However, know that getting this cover on your car insurance is totally valuable. You should evaluate your car's value, the impact of the premium on the cost, and the likelihood of repairs. Furthermore, before getting the depreciation cover, make sure to understand personal financial risk tolerance.

Read More:All you need to know about zero depreciation car insurance.

Who Should Choose Zero Depreciation Car Insurance?

Given the benefits of zero depreciation car insurance, it is advisable to choose it. Here's who should get this insurance cover:

1. New Car Owners:

Whenever you buy car insurance online for your vehicle, make sure to add zero-depreciation cover. However, make sure to purchasethird party car insurance as well, since it is a mandate.

Pro tip:If your car is new, i.e. within the first 3 years, then you must surely add zero depreciation, as the additional cost would be lesser than the additional amount you could have to shell out in case of a claim!

2. Luxury Cars Owners:

As a luxury car owner, you'll have to pay higher charges for repairs. With the zero depreciation cover, you can avoid expenses and boost savings.

Pro tip:Luxury vehicles or modern SUVs often have sensors, cameras, expensive accessories, LED lights, etc., so a minor accident can still lead to a large bill. Thus, a zero-dep policy in this case works as a cost-control tool, not just protection.

3. New Drivers:

If you're learning to drive, it is advisable to opt for a zero-depreciation cover. Due to a lack of experience, the risk of accidents is high. The cover can save you from unwanted out-of-the-pocket expenses.

Pro tip:In India, road-safety data[a] shows that young, inexperienced drivers face the highest accident risk. People aged 18–34 account for nearly half of road fatalities in several analyses. So, if you are new to driving, it is best to opt for the add-on cover!

Will Zero Depreciation Cover Save You Money?

Without zero depreciation oncar insurance, you might have to pay a really high amount because the insurer may apply a 10-50% depreciation value. However, if you have the cover, the insurer will only pay the full amount without subtracting depreciation. This can lead to significant reductions in expenses. Hence, it would be worth it.

In the initial years, cars have specific components that can drive heavy depreciation. Even for a minor accident, you may have to pay a higher amount without zero depreciation. As the car ages, the repair costs will reduce, and insurers will keep everything in place.

Apart from the car's age, your driving habits also help to determine if this can save you money. If you drive in heavy traffic or crowded areas, the risk of damage increases. Therefore, even if you're driving your car less than 5,000 km a year, zero-depreciation car insurance helps.

However, if your car is mostly parked and rarely comes out, or you drive sparingly, paying extra may not be justified.

What Will the Zero Depreciation Cover?

When you buy zero-depreciation car insurance online, check what it covers. Usually, the cost of repairs and replacements for the damaged parts is a key factor. These costs are also covered under specific situations, such as the following:

1. Natural or Man-made Disasters:

If your car is damaged due to a natural calamity, such as a flood or landslide, the car insurance company will consider the zero-dep add-on. It will also come into effect in the event of damage caused by vandalism, riots, or terrorist attacks.

2. Accidental Damages:

Accidental damages are the most common cause of damage to your car. Zero depreciation will provide coverage for damage from collisions or other road accidents.

3. In-transit Damages:

If your car is damaged during transit, the zero depreciation cover will provide benefits.

In such cases, you could also consider theReturn-to-Invoice cover.

Benefits of Zero Depreciation cover:

Even for cars driven less than 5,000 km a year, the risk remains. After all, the advantages that you have are the same, considering the risk of accidents.

Here are some of the key reasons why you should get this cover even if you drive your vehicle less:

1. Full Claim Settlement

The insurance company will offer you a full settlement for the damage, without factoring in depreciation. Whether it's headlight damage or bumper damage, the zero depreciation add-on will cover it all.

2. Increased Coverage

Adding zero depreciation to a comprehensive insurance policy enhances its coverage. It covers the additional cost for parts such as plastic, fibreglass, and rubber. Therefore, if there is damage, you can get the repairs without paying extra. However, make sure to understand thedifference between zero depreciation and comprehensive insurance.

Are There Any Limitations of Zero Depreciation?

The benefits of zero depreciation cover are endless. However, for some who drive their car very rarely and in less risky areas, there are certain limitations too. The most common ones include:

• If your car isn't at risk of accidents, getting zero-depreciation insurance may not be worth it.
• There are some exclusions to the policy in terms of specific parts.
• The coverage under this add-on can vary significantly.
• Extremely old vehicles may not be eligible for the cover.

What happens if I make a claim under zero depreciation even though the car is driven less than 5000 km annually?

If you file a claim for damaged parts such as metal panels, trims, and so on, the insurer will not deduct the amount. Under the standard insurance policy, you would have had to pay a significant claim amount.

However, without depreciation cover, you will incur full costs for the approved replacements. You don't have to go for any out-of-the-pocket investments, except for exclusions and deductibles.

For older vehicles over 5 years old, is zero depreciation applicable?

The vehicle's age determines whether zero depreciation applies. In most cases, zero depreciation applies to cars older than 5 years. Zero-depreciation car insurance eliminates depreciation deductions for replaced parts. However, compulsory and voluntary deductibles still apply as per policy terms.

Expert Note

This information is based on standard motor insurance guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI) and commonly followed industry practices. Policy coverage and conditions may vary by insurer.