Clearly, the zero depreciation rider has its advantages over standard coverage. But every good thing has its costs. To begin with, a policy that offers zero depreciation will cost more close to 20 percent more than your standard no-frills policy.
This means that you are paying a substantially higher premium to ensure not having to chip in during claim settlement in the future. In other words, you are already paying towards those future costs. To customers seeking affordable insurance, this could be a deal breaker. On the other hand, the prospect of zero depreciation will attract customers who do not mind the higher annual rates because it promises peace of mind.
A zero depreciation cover may also limit the number of claims that you can make annually. This is necessary because customers might otherwise file claims for every little dent, simply because they do not have to foot any of the costs. In the world of health insurance, insurers introduce co-pay for the same reason: to ensure that their customers do not go overboard in filing claims.
Furthermore, the zero depreciation rider applies only to new cars, with the age limit being three years. If your vehicle is older, it is not eligible for this benefit. Moreover, it may not be cost-efficient to shell out higher premiums on a five-year-old vehicle.