Zero Depreciation Car Insurance vs Comprehensive
Having valid third party car insurance is mandatory as per the Indian Motor Vehicle’s Act without which the owner/driver can be fined up to Rs.5000 or up to 3 months imprisonment or both. This has led to the demand in third party insurance in the market, but the third party car insurance is limited to cover the damages sustained by third parties and not the insured’s own vehicle. So the customers have started looking for the insurance which can cover both the vehicle as well as the third party damages which ultimately led to the purchase of Comprehensive car insurance. But the comprehensive car insurance had its own limitations in the form of depreciation.
Depreciation refers to the decrease in the value of the asset over a period of time due to usage. The depreciation is factored in case of comprehensive car insurance claim and only partial claim amount is paid to the insured. The remaining amount has to be borne by the insured customer which is the depreciated amount for the damaged parts. This had led to the need for the Bumper to bumper cover or the Zero depreciation cover in car insurance at the time of claim. The Zero depreciation cover is the most preferred add-on or rider in the car insurance policy as it covers almost the entire claim amount incurred by the insured due to an accident. Let us understand the difference between the Zero depreciation cover and the Comprehensive cover in car insurance:
Comprehensive Insurance:
The term comprehensive cover in car insurance denotes the type of coverage selected by the insured customer. There are two types of car insurance policy available in the market, one is Only Third party car insurance and the other is Comprehensive insurance. The comprehensive insurance includes both the third party cover as well as the Own damage cover while the only third party insurance cover doesn’t include the damages to the car.
Comprehensive cover also known as the Package policy covers the loss or damage to the vehicle due to an accident and other insured perils. Any third party bodily injury or property damage is also covered under the comprehensive policy under the third party damage section. The own damage claims in comprehensive policy are settled by reducing the depreciation amount.
Zero Depreciation Insurance:
The Comprehensive cover in car insurance can be equipped with add-ons or riders for extra coverage. One of the famous add-on in the car insurance is the Zero depreciation cover or Bumper to bumper cover. The zero depreciation add-on covers the depreciation cost incurred on the damaged part due to an accident. Zero depreciation cover can be included under the own damage section at the time of policy purchase by paying extra premium to the insurance company.
The zero depreciation cover can be considered as an extended version of the Comprehensive cover of the car insurance policy which can be availed on paying extra premium.
Comparison:
| |
Comprehensive Cover |
Zero Depreciation cover |
| Premium |
Includes Own damage and Third party premium. Third party premium is decided by the IRDA and own damage premium is decided by the insurance companies within the set limit |
Slightly higher than the Comprehensive cover premium and includes the add-on premium paid for the Zero depreciation cover as well as the Own damage and Third party premium. Normally the zero depreciation cover premium would be a percentage of the Insured Declared Value of the car. |
| Claim amount |
Covers claim costs after factoring depreciation costs i.e. depreciation amount is not taken into consideration at the time of claim settlement |
Covers the entire claim cost including the depreciation costs. The cost of depreciation is not deducted from the final claim bill. |
| Age limit |
Comprehensive cover can be offered up to 15 years age of vehicle or more than that depending on the mutual agreement between the insurance company and the insured customer |
Zero depreciation cover is generally offered only up to 5 years of age by most of the companies. Some companies offer the zero depreciation cover as an add-on up to 7 years of vehicle age depending on several factors such as Make model of the vehicle, cubic capacity of the vehicle, previous year loss ratio of the vehicle etc. |
| Parts Covered |
Up to 50% depreciation is applicable on parts such as Wood, Fibre,Steel etc., at the time of claim settlement. |
No depreciation is applicable on any part at the time of claim settlement and the claim is paid accordingly. |
| How many times
Can you claim? |
Under the comprehensive cover any number of claims can be made and all the claims are settled after factoring depreciation. |
Some companies offer the claim settlement with Zero depreciation cover only up to 2 claims after which the claims would be settled on comprehensive cover basis, while some companies have no limit on the number of claims that can be made under the Zero depreciation cover. |
| Cashless/Reimbursement |
Cashless claim settlement can be availed from the list of network garages available in your area of operation. Reimbursement claims are also allowed under the comprehensive car insurance policy subject to complete documents being submitted to the insurance company. |
Cashless claims with depreciation cover can be availed only in the tie-up garages. In case of reimbursement claim outside the list of tie-garages, the claim would not be settled under the depreciation cover. |
Zero depreciation cover is also called as Nil depreciation or Bumper to bumper cover and covers the cost of depreciation of the damaged part at the time of claim. Without zero depreciation cover the cost of depreciation associated with the part would have to be borne by the insured customer. The bumper to bumper car insurance covers the loss or damage to the parts of the car at the time of claim without factoring depreciation.
The major difference between the Zero depreciation cover and Comprehensive cover is the claim settlement by taking depreciation amount into consideration.
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