Understanding The Difference Between Third Party Cover and Zero Depreciation Cover In Car Insurance
Let's decode the difference between third party car insurance and zero depreciation cover!
Table of Contents
Car insurance is an essential requirement in this uncertain world. Also, the fact that a car is often a much-loved asset for people and sometimes even a single dent on it can make many car owners sad, makes having car insurance all the more important. The insurance industry understands this emotional connect as well as the safety requirements of people and thus offers three types of car insurance - third party liability only car insurance, comprehensive car insurance and standalone own-damage car insurance. Besides different types of car insurance policies, car insurance companies also offer a number of add-on covers that extend the coverage of the purchased policy. One of the most popular car insurance add-on is zero depreciation cover.
Third Party Insurance vs Zero Depreciation
Third-Party Liability Only Policy: It is a type of car insurance policy that offers insurance coverage for all the third party liabilities - injury, death of a third party as well as damages caused to a third party property. As per the Indian Motor Tariff 2002, it is compulsory for every car owner in India to have at least a third party liability only policy cover.
A third party liability only cover entitles a policyholder for compensation in the following cases:
- Limited/Unlimited compensation for injuries caused to a third party by the insured's vehicle.
- Unlimited compensation in case of death of a third party. The final amount is decided by a court of law.
- Up to Rs. 7.5 lakh compensation for third party property damage.
- Optional legal liability cover for a hired driver against payment of an additional premium.
- Optional insurance cover for unnamed passengers against an additional premium.
No car insurance add-ons can opt for a third party liability only car insurance policy.
Zero Depreciation Cover: Zero depreciation cover is a car insurance add-on that insures a policyholder against the depreciation cost of the insured's car. Depreciation is the process of devaluation of your car due to regular wear and tear. By default, the car owner is liable to pay for the depreciation cost at the time of a claim settlement.
However, by opting for a zero depreciation cover, policyholders can shift this liability to the insurer. Just like any other car insurance add-on, zero depreciation cover can be bought with a standalone own-damage car insurance policy and a comprehensive car insurance policy only.
Zero depreciation add-on covers the depreciation cost of all car parts at 100% except tyres, tubes, and batteries which are covered at 50%. Generally, the zero depreciation cover is available for cars not more than 5 years but some insurers offer this cover for older cars as well.
Depreciation Cost Under Third Party Policy vs Zero Depreciation Cover
|
Age of Car |
Depreciation Cost Under Third Party Policy |
Depreciation Cost With Zero Depreciation Cover |
|
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 |
Depreciation Cost Under Third Party Car Insurance |
Depreciation Cost With Zero Depreciation Cover |
|
Paint work / Rubber / nylon / plastic parts, tires and tubes, batteries and airbags parts |
50% |
0% |
|
Fibre glass parts |
30% |
0% |
|
Glass parts |
Nil |
0% |
Difference Between Third-party Car Insurance vs Zero Depreciation Cover
There are some differences between third party cover and zero depreciation cover which are as follow:
1. The fundamental difference between a third-party car insurance plan and zero depreciation cover is of their nature where the former is a car insurance policy to ensure you while the latter is a car insurance add-on cover to increase the policy coverage.
2. A third-party liability plan is compulsory to be owned by every car owner being the basic insurance cover while the zero depreciation cover is an optional cover that is added to the plan on the choice of the policyholder to enhance the coverage of the policy.
3. Zero Depreciation add-on cover can be availed only by clubbing with a standalone own damage cover or a comprehensive car insurance policy while the third party cover needs no plan to be clubbed with any plan and it can be used alone as well.
Takeaway
In a nutshell, having third party insurance is compulsory for every car and will help you cover the cost of third party liabilities in case of a mishap. However, on its own, just a third party is not enough to remain covered during a mishap. With own-damage car insurance, you can also get compensation for the cost of damages to your own vehicle. But with cars, the cost of depreciation makes this compensation lower than it could be over time. Hence, to remain covered and receive the highest possible compensation it is advisable to purchase a comprehensive cover along with a zero depreciation cover. It will ensure that the compensation does not take into account the depreciation rate. Additionally, when purchasing insurance, make sure to purchase online. It is the simplest method, moreover, with a few clicks, you can compare the different car insurance companies, the quotes they offer and their network of cashless garages. Additionally, if you have existing insurance you can also renew it online and check the premium amount on our premium calculator. With so many choices in terms of insurance policies, it is crucial you make an informed choice when purchasing a policy for yourself. Hence, we have put together a number of car insurance articles to help build your basic knowledge. Click here to read them.
Disclaimer: This article is issued in the 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.
