It is natural for an asset to depreciate in value. With respect to a car, its value is not going to remain the same for years. For example, if you had purchased a car for Rs. 5 lakhs, after four years, its value will be around 3 lakhs. In purely accounting terms, depreciation is the reduction in the value of an asset over a period of time due to natural wear and tear. In fact, the depreciation component kicks in the moment you drive your car out of the showroom. Read ahead to know how to avoid consequences of depreciation with respect to car insurance.
Depreciation and IDV
Depreciation of your car is the base for calculating its Insured Declared Value (IDV). Insured Declared Value in turn is of great importance while determining car insurance premium and while settling claims related to total loss (irreparable damage of the car or theft).
Here’s a table that further elaborates the relation between the IDV of the car and its depreciation.
The above-mentioned table is in accordance with the rules and regulations stated by the apex body related to insurance in India – Insurance Regulatory and Development Authority of India (IRDAI). All insurers follow this table to calculate the car’s IDV.
Skipping Depreciation
Is there a way you can negate the impact of depreciation when it comes to car insurance claims? Yes. You can do so by going for a Zero Depreciation Add-on.
In case you have a basic Comprehensive plan, the insurer will deduct the depreciated value before settling the claim. However, if you have a Zero Depreciation Add-on along with your Comprehensive plan, the insurer will not deduct the depreciation amount and settle the claim amount without considering it. This way, you shall get a higher claim amount.
Note that purchasing a Zero Depreciation Add-on will increase your car insurance premium. But you get 100% coverage regarding specific car parts such as fiber, rubber, and metal parts with this add-on. So, it is a minor expense for extensive coverage.
Which factors affect Zero Depreciation car insurance prices?
Major factors that affect Zero Depreciation car insurance prices are:
● Vehicle’s age
● Model/variant of the vehicle
● Location
Who should opt for Zero Depreciation cover?
● Owners with brand new four-wheelers
● Owners with high-end cars
● First-time drivers
● Those residing in accident-prone locations
● Those who have a car with costly spare parts
● If you worry about scratches and dents
Compare car insurance quote online
Few years ago, it was a tedious task to compare car insurance quotes. Nowadays, it can be done within minutes. Digitization of the Indian insurance industry has made it extremely easy for potential policyholders to compare and purchase car insurance. Existing policyholders can also renew their car insurance policy online easily as well.
Digital insurance companies have changed the game as far as the car insurance industry is concerned. You can insure your car anytime from anywhere with an internet-enabled smartphone. The purchase journey is similar to that of popular E-commerce websites. Thus, it is convenient and not time consuming at all. Login, fill details, select ideal plan, make the payment and you can download your car insurance policy. That’s it!