Vehicle owners drive in 'zero dep' policy cover

MUMBAI: Zero depreciation covers, also known as 'zero dep' policies, for motor insurance are becoming a hit among mid- and top-segment vehicles with most preferring the enhanced cover over the standard motor policy.

These policies came tomade their entry into the India market two years ago after the regulator gave companies the freedom to modify standard motor insurance policies. One glaring shortcoming of the standard motor policies was that the insured had to pay a large amount for repairs of plastic and fibre parts and also in the case of old vehicles, a large chunk of the repair cost was recovered from the customer because he was getting new parts for old.

In the case of mid and top-segment cars, the vehicle owner ends up paying for a large chunk of the repairs due to because of damages to the bumper and rubber parts. In major accidents, the cost of these can itself add up to over Rs 1 lakh which has to be borne by the owner even if he has a standard motor policy which incidentally is also called a `comprehensive ' cover'.

The zero dep policy pays the claim in full for a premium which is around 20% higher than the standard cover.


"The zero depreciation policies are becoming a standard cover at the high-end and many mid-segment car owners are going for this cover," said Gaurav Gupta, MD, Tata AIG General Insurance. Tata AIG was one of the earliest companies to introduce this product when regulations were eased in 2009. "Our policy package besides providing zero depreciation also ensures that the policyholder does not lose his no-claim bonus," said Gupta.

According to Vijay Kumar, head, motor insurance at Bajaj Allianz General Insurance, depreciation deductions can be as high as 40% depending on the age of the vehicles. "We offer this cover as a part of a package which includes zero depreciation, roadside assistance and also covers damages to the engine on account of hydrostatic lock (damage due to water entering the engine)," he said.

But despite the increasing sales of this policy, several vehicle owners are not aware of this product.

S Harsh Vardhan, a senior executive with a private firm in Mumbai was upset when he discovered that he had to cough up Rs 65,000 towards repairs to his Honda Civic for parts that the insurance company would not pay in full. He was doubly upset on discovering that there was a cover which would have paid for these damages. "If I had known that I could get a zero dep policy for a few thousand rupees more, I would have definitely gone for it" he said.