Let’s first understand what really zero depreciation adds on actually means. To understand this better take the case of problems faced by Mr.Swami. Last year due to some serious accident Swami needed a fully fledged repair of his car but when he went back to his insurer for getting the repair cost reimbursed, the insurer only paid 70% of the cost and rest had to be borne by Mr.Swami out of his own pocket .This made him very furious but one thing that he forget is that his existing car policy was just a plain vanilla comprehensive insurance plan. In regular comprehensive car insurance plan without any zero depreciation add-on it is always the liability of insured to pay for difference in the market value and depreciated value of any part that is insured under the policy. So it is always advised to a policyholder to opt for zero depreciation cover to protect himself from paying high cost at the time of claim settlement.
To understand the difference lets judge both forms of cover four basic parameters which can give can possibly give you better understanding of things:
a) What happens during claim settlement? So when you make a claim in a policy which already has zero depreciation add-on attached to it you can get full settlement of your claim without causing an dent to your pocket due of depreciation whereas in a normal policy you as a policyholder need to bear the cost of depreciation out of your own pocket
b) Premium: In a case of zero depreciation cover since your insurer bears the depreciation cost under the policy so for obvious reasons the premium would be always higher than a normal car policy.
c) Cost of repair and replacement of parts: Say in case you required massive repair of your car which also need replacement of certain parts of your car, a comprehensive car policy with zero depreciation would bear the total cost of repair and replacement cost but that is not the case of a regular comprehensive policy.
d) Age of the car: This is one of the important factors which can help you decide whether to take a zero depreciation add-on or not. Most of the insurers offers zero depreciation add-on to cars which have age of less than 5 years .In fact as the age of the car increases depreciation risk also increases and even if you take zero depreciation for a old car then there are chances that still you might have bear some part of the cost while making a claim. So while deciding upon a zero depreciation add-on one should consider the age of his/her car because there is no point of paying an extra premium if the age of the car has crossed 5 years.
So it is always advised to buy a zero depreciation add on for a new car where the same add some value. Another important factor one should remember in case you have opted by a zero depreciation cover please don’t make a claim multiple times in a year and make a claim only when the claim size is big. Multiple claims might not be even entertained by your insurer and they might also have some limits on the same