Zero-depreciation insurance are now the preferred option for 95% of new automobile buyers, more than ten years after they were introduced. Known as bumper to bumper coverage, this type of coverage does not account for part depreciation as cars age, which has led to a rise in the number of claims.
Previously, depreciation clauses in auto insurance claims were intended to cover the replacement value of outdated parts, but they frequently left claimants with out-of-pocket costs because the clause was based on the idea that claimants shouldn't profit monetarily from a claim.
In addition to the depreciation deduction, the normal motor policy included non-metal part deductions, which are absent from zero-depreciation coverage.
A Policybazaar analysis indicates that more than 95% of purchasers of new cars select this coverage. Zero-depreciation coverage is chosen by policyholders renewing their policies or moving to a new insurance provider in addition to new automobile owners. For the first three years of ownership, this coverage is selected by more than 85% of purchasers.
Because there are no deductions under zero-depreciation policies, claim amounts are larger than ordinary claims, said to Nitin Kumar, head of automotive business at Policybazaar. The average amount of claims for non-zero depreciation insurance is between Rs 13,000 and Rs 14,000, whereas claims under zero depreciation policies go to Rs 21,000 to Rs 22,000.
"While the size of claims has not increased significantly, the frequency has increased as more people are buying high-end cars and car owners are now more conscious of the external appearance of their vehicles," says Kumar. The growing use of ceramic coating in contrast to prior times is another sign of this awareness.