Difference: Zero Depreciation vs Comprehensive Car Insurance

Published On 23 Sep 2019 By InsuranceDekho

Difference Between Zero Depreciation 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 a third party car insurance. Besides these three types of car insurance policies, there are also a number of car insurance add-ons which can be opted with the standalone OD policy and comprehensive car insurance policy. A car add-on is an extra cover which 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 which insures the policyholder against both the third party liabilities (both life and property) as well as own damages which may arise due to a road accident or any other unfortunate event involving the insured 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 insured 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 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 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 is opted 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 which 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.