India sold more than 41.08 Lakh cars in 2023. This is an 8.3% increase in units compared to 2022. Funnily, this reminds me of all the reels I watch where people ram their brand-new cars while driving them out of the showroom. Jokes aside, a total of 4.6 Lakh accidents were recorded as per The Ministry of Road Transport and Highways data in 2022. And considering the fact that 3 out of 5 people opt for car loans, your burden to fix your vehicle will definitely be higher.
As a vehicle enthusiast myself, I’d hate to see a single scratch on my car or bike. I know some of you are going to say, dude, it’s a new car, it comes with insurance. Why do you care so much?
You’re right. But there’s a small problem. This particular mistake will cost you thousands of rupees. That is not adding a Zero Depreciation Add-On to your insurance coverage.
Good to Know: Usually Zero Depreciation Add-On is refered to as a Bumper-To-Bumper Cover by the sales folk in a vehicle showroom.
What is a Zero Depreciation Add-On?
Before I explain this, let me help you understand what a depreciating asset is. Certain assets have a useful life. Meaning it’s only going to function well for a specified period of time. Later due to wear and tear, eventually, maintenance will increase, and the value of the asset will drop. These are usually referred to as depreciating assets.
A car is called a depreciating asset. This is because, over time, the value of your car will reduce. In fact, a brand-new car will lose 9-11% of its value the moment you drive it out of the showroom. This is higher in case you drive a luxury car.
What does this have to do with a Zero Depreciation Add-On?
In the unfortunate event of a car accident, the insurer will never pay you the entire amount quoted for the repair. This is because they will not cover the depreciated value of parts.
The rate of depreciation again differs based on the type of the vehicle part. For example: Plastic parts have a depreciation of 50% flat.
Refer to the charts below to understand the different depreciation rates:
Part-wise depreciation rates
| Parts Wise | Depreciation Rates (%) |
| Rubber, Nylon and Plastic Parts | 50% |
| Fiber Glass | 30% |
| Glass | NIL |
| Car Paint | 50% on just the material cost for painting. 25% in case of a consolidated bill. |
Depreciation % for metallic parts in cars
| Age of Car | Rate of Depreciation |
| Less than 6 Months | NIL |
| 6 Months – 1 Year | 5% |
| Between 1 – 2 Years | 10% |
| Between 2 – 3 Years | 15% |
| Between 3 – 4 Years | 25% |
| Between 4 – 5 Years | 35% |
| Between 5 – 10 Years | 40% |
| More than 10 Years | 50% |
This is why it’s important to get a Zero Depreciation Add-On. With this add-on, as the name suggests, the insurer will not deduct any depreciation. Instead, you will receive a higher value on the claims you make.
One important thing to note is that this add-on can be included only for new cars less than 5 years old. Apart from this, some insurers also have a limit on the number of times you can make a claim with Zero Depreciation.
Hence, make sure to properly research the policy before taking one up.
How to get a Zero Depreciation Add-On?
- If you’re purchasing a new car, you can ask the salesman to include the Zero-Dep Add-On to your insurance. It will increase your insurance premium by a small amount, but it is definitely worth the hassle.
- In case you already have a car, but it’s still new, you can add this cover as an add-on while renewing your insurance at the end of the year.
Zero Depreciation is crucial to keep your pockets happy in the case of an unfortunate event. Hence, it can be considered while purchasing a new vehicle!
