Vehicle Insurance helps pay for damages that occur due to accidents and other situations. However, a typical Vehicle Insurance policy won’t cover your vehicle as per its purchase price. It insures you on the basis of the depreciated value of the vehicle and its parts. While there is nothing inherently wrong in this, insurance buyers don’t like paying the balance from their own pocket after repairs.
Moreover, the depreciation rate could keep rising, subsequently lowering the value of the vehicle and its parts after a few years of use. This means you may have to pay a higher amount in case of repair or replacement of vehicle parts.
But, not to worry! Insurance buyers have a solution to this: The zero depreciation insurance cover, which is made specifically for this situation. Here’s what you need to know.
Get Full Value
With a zero depreciation insurance policy, vehicle buyers can get the full value of the repaired or damaged parts. The reimbursement doesn’t consider the depreciated value, but the full value instead. Hence, customers do not have to pay a fortune to get their vehicles back in shape after a mishap.
Pay A Higher Premium
Since zero depreciation insurance cover pays for the full value, the premium is bound to be higher. The premium for any insurance is proportional to the potential payback to the insured. In this case, since the policy doesn’t consider the depreciated value of the vehicle, the potential for payback is much higher. Hence, this type of insurance policy is more expensive than a regular comprehensive insurance policy.
Only New Vehicles Covered
Zero depreciation insurance cover can typically be taken with new vehicles. Since it is difficult for insurance companies to check old cars for their integrity, they may not approve it for older vehicles. However, insurance seekers can check with insurance companies since a few companies may provide this coverage if the age of your car is less than three years.
Limited Number of Claims
Since the insured party is well-equipped with a zero depreciation cover, there is a risk to the insurer that claims may be made even for minor repairs. To deter frivolous claims, insurance companies typically limit the number of claims that can be made in a year on a zero depreciation policy. Keep this in mind if you plan to take zero insurance cover for your new vehicle.
Everyone Should Consider It
Usually, a zero depreciation insurance cover should be taken by new drivers for whom the chances of accidents—and therefore the chances of incurring repair-related expenses—are higher. At the same time, experienced drivers, too, are not immune to driving risks. A zero depreciation insurance cover will ensure that your finances are not impacted by major repairs.
Before buying a zero depreciation insurance cover, it is advisable to compare all products by premium costs and features. The premiums may vary, as may the features and options. Moreover, look for a product with a high claim settlement ratio.
(The writer is CEO, BankBazaar.com)