Car depreciation cover affects claim settlements in the sector of auto insurance. People might think that comprehensive insurance cover for vehicle saves the insured person from the incidence of pocket expenses, but in that, you would be mistaken. At the time of claim, auto insurers will consider a rather complicated formula to find out the payable amount.
Zero depreciation coverage offers comprehensive cover without factoring in for depreciation. In case car is damaged due to collision and file a vehicle insurance claim, then insurance company in India will cover the whole cost.
This cover is different from standard comprehensive cover because a zero depreciation cover in motor insurance provides complete settlement cover. On the other hand, standard comprehensive cover does not give zero depreciation and will make estimates depends on the ‘existing value’ of car.
Consequently, in case vehicle is involved in an accident, then standard plan will pay the bill after deducting for depreciation whereas zero depreciation cover will pay the bill regardless of the existing car value. It has its wide range of benefits and little expensive costs.
This clearly means that policyholder is substantially paying a higher premium to make sure you are not having chip in while claim settlement in the future. In simple words, person is already paying towards those future expenses.
On the other hand, zero depreciation cover will attract customers who are ready to pay the expensive annual rates because it gives peace of mind. Also, it limits the number of claims which insured can make yearly.
It is important because buyers might otherwise file motor insurance claims for all little dents because they do not give to foot any of the rates. Insurance companies in India offer co-pay feature to ensure that their clients do not go overboard in filing claims.
The zero depreciation riders apply only to new vehicles, with the certain age limit. In case car is older, it is not eligible for this advantage. It may not be cost-efficient to shell out higher premiums on a 5-year old car.