Comprehensive Insurance Vs. Zero Depreciation

Just like you choose the toppings like pepperoni, olives, mushrooms, extra cheese, etc. on your pizza to make it more delicious, you can also opt for add-ons like a no claim bonus protection add-on, roadside assistance add-on, engine protection add-on, etc.

We’ve talked about these and a lot of other add-ons in detail here.

In this article, we discuss one very popular add-on cover - the Zero Depreciation cover, and how opting for this cover can affect the coverage of a base motor insurance plan .
 

What Is Comprehensive Motor Insurance?

A comprehensive motor insurance policy offers financial protection against any loss or damage caused to your motor vehicle due to accidents, theft, fire, natural calamities, civil disturbance, etc. It also covers injuries caused to you or the third party or any damages caused to the third party property because of an accident.
 

Benefits Of A Comprehensive Motor Insurance Policy

There are a lot of benefits of purchasing a motor insurance plan, like -

• It is available at a nominal cost.
• The buying process is very hassle-free.
• It offers protection to your vehicle against a wide range of risks.
• It provides compensation in case of accidental disability or death.
   

What Is The Zero Depreciation Add-On? How Does It Work?

Also known as Nil Depreciation or Bumper to Bumper cover, the Zero Depreciation is an add-on that doesn't consider ‘depreciation’ factor from the policy coverage.

Generally, as a vehicle gets old, it undergoes depreciation, i.e., it loses its value over time. And when you make a claim under the policy, the insurance company factors in the depreciation for the parts of the car, deducts it from the IDV of the vehicle, and then pays the claim.

The Zero Depreciation add-on ensures that depreciation is not considered at the time of claim settlement. It covers all parts of your car at original cost except tyres, tubes, and batteries which are covered at 50% cost. Also, some insurers allow you to claim only twice under this add-on, whereas other insurers (like IFFCO Tokio) allow you to claim unlimited times during the tenure of your insurance policy.
 

Who Should Opt For The Zero Depreciation Add-On?

You can opt for the Zero Depreciation add-on if

• You have purchased a new vehicle.
• You own an expensive/ luxury vehicle.
• You live in a city that is more prone to accidents.
• You worry about minor bumps and dents.
• You have a vehicle with expensive spare parts.
   

Benefits Of the Zero Depreciation Add-On

Here’s a list of benefits provided by the zero depreciation add-on -

• It increases the coverage of your base plan.
• The repair costs of your vehicle are considered without the
  depreciated value. Hence, it helps in saving money in the longer run.
• The overall claim amount you get out of the total claim amount if you’ve opted for this add-on is higher compared to the amount you get if you don’t opt for this add-on.
• It helps curb out-of-pocket expenses since depreciation cost is not considered while calculating the claim.
   

Buying A Comprehensive Motor Insurance Policy With Zero Depreciation Cover And Buying It Without Zero Depreciation Cover

Similarities:

Both these insurance covers -

• Provide protection against own damages and third-party liabilities.
• Allow discounts for installing anti-theft devices, membership of Automobile Association, etc.
• Allow you to claim on a cashless basis.
• Offer coverage for one year.
• Allow you to select other add-on covers.

Differences

Depreciation Rates With And Without Zero Depreciation cover

Here are the applicable depreciation rates based on the age of a vehicle.

Depreciation Rates That Are Applied On Vehicle Parts

Example: Say you apply for a claim wherein the fibre parts are repaired at a cost of INR 10,000, and nylon parts are repaired at Rs. 5000. Let’s look at the claim payable under both - a policy with zero depreciation add-on, and a policy without the zero depreciation add-on.

So, if you don’t have a policy with the Zero Depreciation cover, you’ll have to pay the depreciation cost of Rs. 6500 out of your own pocket.

This brings us to the end of this article.

At the time of a motor insurance claim, the insurance company will deduct the depreciation value of the vehicle and then pay the claim. If you want to avoid this, you can opt for the Zero Depreciation add-on with your comprehensive motor insurance plan. With this add-on, depreciation will not be considered at all while calculating the claim amount.
 

Frequently Asked Questions

1. Can I add a Zero-Depreciation cover to a third-party policy?
No, a third-party policy only protects you against any damages caused to the third party or their property. A zero-depreciation cover cannot be added to a third-party liability policy.

2. How many claims can I make under a Zero-Depreciation cover?
Generally, you can make only two claims under the zero-depreciation cover, after which all the other claims will be considered normal claims, and depreciation of the parts of the vehicle will be taken into consideration.
Note: You must check the policy wording or verify with your insurer about the number of claims that you will be able to make under the zero-depreciation cover as this may vary from insurer to insurer.

3. Is it possible to convert a comprehensive policy to zero depreciation?
Yes, it is. If your vehicle is not more than 5 years old, you can add a zero-depreciation cover to your policy at the time of renewal or while purchasing a new policy.

4. Who should purchase a zero-depreciation policy?

• If you purchase a comprehensive policy for your new vehicle, it is better to get a zero-depreciation cover with your policy as an add-on.

• If you own an expensive vehicle and want maximum coverage for your vehicle, a zero-depreciation cover is a good option.

• If you live in an accident-prone area or are someone who gets into frequent accidents, adding a zero-depreciation cover will be an apt choice.

5. Will I get a zero-depreciation cover for my old vehicle?
Most insurers provide zero depreciation to vehicles that are not more than 5 years old. But, there are few companies that provide zero depreciation only till the vehicle is 3 years old and there are also companies that provide zero depreciation irrespective of the age of the vehicle (certain terms and conditions may apply). You will have to check with your respective insurers regarding the terms and conditions.

6. Will adding a zero-depreciation cover to my policy waive compulsory deductibles at the time of claims?
No, as the name suggests they are compulsory deductions that will happen each time you make a claim, so adding a zero-depreciation cover to your policy will not waive off compulsory deductibles.

7. Is it worth paying extra money and adding a zero-depreciation cover to a comprehensive policy?
If you have a new vehicle or a vehicle that is not more than 5 years old, it is better to add a zero-depreciation cover to your comprehensive policy as it will reduce your out-of-pocket expenses at the time of claim.