Car insurance is not just a legal mandate; it’s a financial safety net that protects your valuable asset against unforeseen events. But do your standard car insurance policies provide enough coverage? That’s where depreciation cover comes into play. While a traditional policy takes into account the depreciation of your car and its parts, leading to reduced claim payouts, depreciation cover ensures that you receive the full value of the damaged or replaced parts.
This added layer of protection is gaining popularity among car owners, especially those with new or high-value vehicles. In this article, we’ll delve into the various perks of opting for depreciation cover with your car insurance and why it could be a game-changer for safeguarding your investment.
What is depreciation cover?
Depreciation cover in car insurance means you can get the full cost of replacing damaged parts, in case of a partial loss. Normally, in policies, the depreciation amount is cut from the claim payment. However, with this extra coverage, the insurance provider will not cut any depreciation amount. So you can get more money to replace old parts with brand new ones after an accident.
This is good because, over time, parts become old and lose value. However, the insurance company will still pay the full price for new parts, even if your car parts are old. This avoids your own money going into paying depreciation costs.
Benefits of depreciation cover in car insurance policy
Here are few key benefits of depreciation car insurance:
- Get complete claim amount for repairs/replacements: There will be no deductions based on depreciation of parts. This helps you get the full cost of repairing or replacing damaged without paying anything from your pocket.
- Covers plastic, rubber, and glass damage: Small car parts like bumpers, wipers, etc., face high depreciation in normal policies. A depreciation cover add-on helps you get the full claim amount for damage to these parts as well.
- Maintains resale value: Your car remains in good working condition even after claims and repairs. This helps fetch a better resale price later on compared to a car that has undergone excessive depreciation on multiple repairs.
How does depreciation coverage work?
- Depreciation add-on waives deduction for depreciation when settling own damage claims. This means you get a higher claim amount.
- In regular policy, the insurer considers depreciation and deducts some amount when calculating claim settlement. You bear part of the repair cost.
- With depreciation cover, the insurer pays the full cost of replacing damaged parts with new ones, regardless of depreciation.
- For example, if a repair costs Rs.1,000, a regular policy may deduct 20% depreciation, i.e. Rs.200. You pay Rs.200 and get Rs.800 as a claim.
- With zero depreciation, you get the entire Rs.1,000, as there is no deduction. The insurer pays the full cost.
- Premium is slightly higher with depreciation cover add-on versus regular own damage policy.
- There may be limitations, such as a vehicle age cap or a maximum number of depreciation claims allowed during the policy period.
Who can benefit from depreciation cover for car insurance?
While depreciation cover can be helpful for all car owners, there are certain groups of drivers who derive maximum value from this add-on cover:
New car owners
For those who have recently bought a new vehicle, depreciation cover can save you substantial sums of money. Brand-new cars tend to depreciate very quickly in the first 3-5 years, even with proper maintenance. So, when an accident happens during this time, insurance companies apply high depreciation rates while settling claims.
Young and new drivers
Drivers who have recently acquired their license often go through an initial learning phase riddled with minor accidents like scrapes and bumper scratches as they get accustomed to operating a vehicle independently. While comprehensive insurance protects from major damages, depreciation cover shields them from even small repair payments during this crucial period as they hone their driving abilities. They can drive easily, knowing they have a safety net.
People living in crowded cities
Depreciation cover is a must-have safeguard for those residing in dense urban metropolitans prone to accidents due to rash driving or narrow roads. It minimises expenses incurred from common minor scratches and dents caused during daily commute in heavy traffic, allowing you to restore your car to top condition without delay.
Points to consider before opting for depreciation cover
Below are some of the important things which you must keep in mind while opting for depreciation cover:
- Premium costs: While the add-on increases your premium, the benefits often outweigh the costs.
- Claim limits: Check the policy’s terms to understand the maximum number of claims allowed under the depreciation cover.
- Car age: This add-on is usually more beneficial for newer vehicles. For older cars, its utility might diminish.
- Insurer’s reputation: To maximise your depreciation cover, choose an insurer with a smooth claim settlement process.
- Policy exclusions: Read the fine print carefully to understand what is and isn’t covered under the add-on.
The bottom line
Depreciation cover is a valuable addition to your car insurance policy, offering complete financial protection against repair and replacement costs. It ensures that you don’t have to compromise on the quality of repairs due to financial constraints, making it an essential choice for new, high-value, or frequently used vehicles.
While it may come with a slightly higher premium, the peace of mind, cost savings, and enhanced coverage it provides make it a wise investment. Before opting for this add-on, consider your car’s age, usage, and the policy’s terms to ensure it aligns with your needs. In today’s fast-paced world, where owning a car is both a necessity and a privilege, depreciation cover helps you safeguard your prized possession with ease and confidence.
