Zero Depreciation Policy

What is Zero Depreciation Policy?

Zero Depreciation Policy is when you buy insurance which covers your property on entirety and the coverage doesn’t decrease in value as time passes. So every year your car will have some depreciation, but if there is an accident then you will get the full money recovered from the Insurance provider and they will not deduct the depreciation value of your carDepreciation Value Of Your CarDepreciation for cars means a reduction in the value of the cars over the period of its life. On average, most of the value of the car is lost in a period of five years and a nominal scrap value is left.read more.

Explanation

Zero depreciation policy is the safest kind of policy where the insurer has got the right to claim the full insured value even after the vehicle was used for years and has depreciated in real value terms. So actual depreciation is not considered by the Insurance policy, and whenever there is a claim, the insurance company considers the new vehicle value. So this is safe for the insurer. The claim helps them either buy a new vehicle, or it can be said that they are not required to add any money from their pocket in case of damage.

Zero-Depreciation-Policy

You are free to use this image on your website, templates etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Zero Depreciation Policy (wallstreetmojo.com)

Factors to be considered for buying Zero Depreciation Policy

The below-mentioned factors are as follows –

Who is Supposed to buy Zero-Depreciation Policy?

It is said that the Zero-Depreciation policy is usually for the new hands. It means a new driver who is shaky and has got no experience of roads should buy this policy as the premium is high and also the coverage is full. Coverage becomes a satisfactory thing for new drivers as they become confident while driving as someone is there to cover the damage in case something happens.

It is also not true that experienced drivers are safe, they may also run into an accident, but the probability of meeting with an accident is more for new drivers.

Advantages

  • The owner will not have to pay a single penny from a pocket as everything is covered. So it is kind of expense-free for the owners. It is the safest insurance, and the coverage remains fixed throughout.
  • Accounting Depreciation doesn’t act as a burden here. Accounting depreciation slowly acts as an expense in case of normal policy, and every policy seller will have their own depreciation rule, which gets difficult for the owner to understand. So it gets easy while opting Zero Depreciation policy as the owner is free from the worry of depreciation.

Disadvantages

  • The Insurance premium is quite high. So it gets challenging for a person to bear this recurring cost as the cost is high and starts acting like a burden when it is paid year on year.
  • It is perfectly appropriate for new drivers who are not so confident. In the case of old drivers, it feels more like a burden to pay the high premium.
  • As the number of claims per year is fixed, at times, genuine claims are also ignored by the insurance company.

Zero Depreciation Policy vs. Normal Policy

Conclusion

Zero Depreciation policy is logical for new users. It gives them confidence as they know that they are covered. One should always consider the trade-off between complete protection and high premium paid. If a user finds it safer to go for complete protection, then they should always go for this policy. An experienced driver may take the risk of not paying the high premium and save money from that as he is confident in his driving.

Recommended Articles

This article has been a guide to What is Zero Depreciation Policy and its Definition. Here we discuss factors to be considered for buying zero depreciation policy along with advantages, disadvantages, and differences from the normal policy. You may refer to the following articles to learn more about finance –