How is Zero Depreciation Cover Different From Comprehensive Car Insurance?
Let's learn the difference between zero depreciation cover and comprehensive car insurance.
Car insurance is a type of general insurance and can be availed in three forms namely standalone own damage (OD) car insurance policy, third party car insurance policy and comprehensive car insurance policy.
As per the Indian Motor Tariff, it is mandatory for every car owner to have at least third party car insurance. Besides these three types of car insurance policies, there are also a number of car insurance add-ons that can be opted with the standalone OD policy and comprehensive car insurance policy. A car add-on is an extra cover that enhances the coverage of a standard policy for an extra premium. The most popular and mostly-opted add-on is the zero depreciation add-on.
What is a comprehensive car insurance policy?
A comprehensive car insurance policy is a policy that insures the policyholder against both the third party liabilities (both life and property) as well as own damages that may arise due to a road accident or any other unfortunate event involving the insured's car. Under a comprehensive policy, limited/unlimited coverage is provided for bodily injuries/death of a third party and a compensation cover of up to Rs 7.5 lakh for third party property damage. All own damages sustained by the insured's car in any mishap are also covered under a comprehensive policy.
A comprehensive policy can be customised using a variety of add-ons available with it such as zero depreciation cover, engine cover, No Claim Bonus (NCB) cover, etc. against extra premiums. These add-on covers provide enhanced safety and coverage of the insured's car.
What is car insurance zero depreciation cover?
A zero depreciation cover is a car insurance add-on, also known as a nil depreciation cover and ‘bumper to bumper cover. Depreciation refers to the loss in value incurred by any commodity due to wear and tear over time.
By default, the liability to pay for the depreciation of an insured's car rests with the policyholder, however, if a policyholder opts for a zero depreciation add-on, this liability gets shifted to the insurer. Thus, when a zero depreciation cover opts with a comprehensive car insurance policy, the insurance provider indemnifies the policyholder for the depreciation expenses of the car and its replaced parts.
Depreciation Rates With and Without Zero Depreciation Cover
|
Age of Car |
Rate of Depreciation Without Zero Depreciation |
Rate of Depreciation Without Zero Depreciation |
|
Under 6 months |
Nil |
0% |
|
6 months to 1 year |
5% |
0% |
|
1-2 years |
10% |
0% |
|
2-3 years |
15% |
0% |
|
3-4 years |
25% |
0% |
|
4-5 years |
35% |
0% |
|
5-10 years |
40% |
0% |
|
Above 10 years |
50% |
0% |
|
Part of Car |
Rate of Depreciation Without Zero Depreciation |
Rate of Depreciation Without Zero Depreciation |
|
Paint work /Rubber/nylon/ plastic parts, tires and tubes, batteries and airbags parts |
50% |
0% |
|
Fibre glass parts |
30% |
0% |
|
Glass parts |
Nil |
0% |
Zero depreciation v/s Comprehensive car insurance policy
|
Basis of differentiation |
Comprehensive policy (With zero depreciation add-on) |
Comprehensive policy (Without zero depreciation add-on) |
|
Premium |
Comprehensive policies with zero-depreciation comparatively cost more than a standard policy without the zero depreciation cover. |
A standard comprehensive policy without zero depreciation add-on cover comes for a lesser premium as compared to policies with zero depreciation. |
|
Claim settlement |
Higher claim amounts because the cost of depreciation is not deducted or factored. |
Lower claim amounts as cost of depreciation gets deducted from the entitled claim amount. |
|
Age of the vehicle |
This add-on is only available for cars less than 5 years of age. |
Available for cars of all ages. |
Should I Buy A Zero Depreciation Cover?
Purchase of a zero depreciation add-on cover is a beneficial investment. It not only shifts the liability of the cost of depreciation from the insurer to the insured but also results in higher claim amounts at the time of settlement.
Also, the cost of depreciation that a policyholder bears for the replaced parts of his/her car at the time of claim settlement is generally higher than the premium which a policyholder pays for a zero depreciation add-on. Thus, buying a zero depreciation cover is highly recommended.
Conclusion
In an overview, the bumper to bumper cover or the zero depreciation cover is an add-on cover. It can be purchased either with a standalone own-damage cover or with a comprehensive car insurance plan. The add-on cover mitigates the depreciation rate of the car during claim settlement, making the insurance claim amount significantly higher. However, this cover is only available for cars that are less than five years old and can be used a limited number of times within the year. Comprehensive insurance, on the other hand, is one of the three types of car insurance available for cars in India. It takes care of both own-damage costs and third party liabilities in the event of a mishap under a single premium. If you are looking to protect your car in a holistic manner it is advisable to purchase a comprehensive car insurance plan and a zero depreciation cover along with it.
When selecting a car insurance policy and add-ons make sure to purchase your car insurance online. That way you can compare the different car insurance companies, the quotes they offer and their network of garages before selecting a policy. Moreover, since the online method cancels out the cost of middlemen the insurance quotes are also lower.
For further reading:
what is comprehensive car insurance
Disclaimer: This article is issued in general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
