Auto Insurance products offer Zero depreciation covers – also known as ‘zero dep’ policies which are very much in demand among mid- and top-segment vehicles with most preferring the enhanced cover over the standard motor policy.
These policies were launched two years ago after the regulator gave companies the freedom to modify standard motor insurance policies. One disadvantage is that the insured had to pay a large amount for repairs of plastic and fiber parts and also in the case of old vehicles, a large portion of the repair cost was recovered from the customer because he was getting new parts for old.
For mid and top-segment cars, the vehicle owner ends up paying for a huge portion of the repairs because of damages to the bumper and rubber parts as in major accidents their costs can 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.
Tata AIG was one of the earliest companies to introduce this product when regulations were eased in 2009. 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.
But despite the increasing sales of this policy, several vehicle owners are not aware of this product!
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