Here Are Some Common Concerns About Zero Depreciation Plans in Motor Insurance Policies

by Phume Mdluli

Motor insurance plans are mandatory in nature—one, for their legal requirement and second, for the protection they offer for vehicles as well as the riders. This makes it critical to not overlook in selecting the right motor insurance policy.

But motor insurance claims are impacted by one essential factor, which is depreciation. It has a significant effect in lowering the amount of claim that is paid out. Depreciation is that element of time which not only impacts motor vehicles, but all fixed assets. An efflux of time results in depreciation, especially for machineries. Hence, you must be aware of what is depreciation and what are its impact on the compensation during a claim.

Zero depreciation cover, also known as nil depreciation cover, is a nifty way to bypass the effect of depreciation. Here, the insurance company compensates for the depreciation element that otherwise is excluded even in standard comprehensive plans. Hence, with a zero-depreciation plan, the insurance companies no longer reduce the impact of depreciation from your claim amount. This results in a higher claim settlement. While this add-on increases the compensation offered, there are some concerns that are often raised. * Standard T&C Apply This article addresses some of those apprehensions. Continue reading to know more.

Zero depreciations plans aren’t valid for vehicles older than five years

Zero depreciation add-on is an effective add-on, especially when it comes to new vehicles. Since the cost of repairs can break your bank, a zero-depreciation add-on can come handy. However, this add-on has certain limitation when it comes to older vehicles, those that are older than five years. Hence, you must be careful in selecting a zero-depreciation plan if you are buying for your old car or bike.

No coverage under zero depreciation in case of a total loss or constructive total loss

Total loss is a situation where the damage to the vehicle is beyond repair. At the time of such an unfortunate accident which makes it uneconomical to repair the vehicle, the bike/car insurance company pays the IDV or insured declared value. Also, if the cost of repairs exceeds 75% of the IDV, it is deemed as a constructive total loss. In both these situations, the zero-depreciation add-on is not considered when settling the claim. Instead the predefined amount of IDV is paid by the insurer. * Standard T&C Apply

Not applicable for claim of certain spares

The zero-depreciation cover is not applicable for certain spares as specified in the policy terms. Some common examples of these spares are tyres, tubes, nuts and bolts, screws, fluids and other consumable spares. Hence, you will be required to pay for these expenses of replacement from your own pocket unless you have a consumables insurance add-on. * Standard T&C Apply

Excludes mechanical damage or engine breakdown

The repairs required to the vehicle in the event of a mechanical damage or engine breakdown fall outside the ambit of zero-depreciation plan. Thus, any regular wear and tear resulting in damages to the engine or machine-driven breakdowns are excluded from the scope of zero-depreciation cover. * Standard T&C Apply

These are some concerns that you must address before buying a comprehensive plan with zero-depreciation add-on. Among the various types of motor insurance plans, a comprehensive policy is advisable for the different benefits it offers along with customisation of the coverage. Please bear in mind that insurance is the subject matter of solicitation. For more details regarding features, what’s excluded, terms, conditions, please read the brochure/policy wordings carefully before finalizing a sale.

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