Car Insurance: Comprehensive VS Zero Depreciation

Having car insurance is important. It reduces financial liability, covers your medical expenses and offers you overall peace of mind. In fact, as per The Motor Vehicles Act 1988, car insurance is mandatory for all vehicles plying on Indian roads.
That being said, Comprehensive or Zero Depreciation? Possibly the first question that comes to your mind when buying or renewing car insurance. Not many in India are aware of the differences between the two and often get confused with their benefits and highlights.
In this blog post, we will help you identify the pros and cons of comprehensive and zero depreciation insurance so that you can make the right decision for you and your car.

Must Read: Everything you need to know about car insurance

Comprehensive Insurance

A comprehensive insurance policy offers coverage over and above the mandated third-party insurance. It protects the car and the car owner in addition to the third-party. Comprehensive insurance offers coverage against accidental damage, natural disasters, riot, vandalism, theft, personal accident and even any legal liabilities to the third-party.

However, when it comes to repairs the entire cost is not covered considering vehicle depreciation which the policyholder will have to bear out their own pocket. Still, the majority of the expense is taken care of by the insurance company.
Comprehensive insurance is recommended for those who are seeking affordable car insurance with maximum coverage and are not concerned about vehicle depreciation.

Although a comprehensive cover might seem a bit expensive, the benefits it offers far outweigh third-party insurance.

Also Read: Car Insurance | When not to file a claim

Zero Depreciation Insurance

Also known as B to B Insurance (Bumper to Bumper Insurance) is an add-on coverage offering complete immunity against depreciation when filing a claim. Zero Depreciation add-on was Introduced in India in the year 2009 and since then has gained popularity amongst new car buyers.

Depreciation: The loss of value that a vehicle undergoes with time is known as depreciation which is directly proportional to the age of the car.

Usually, depreciation of a vehicle is fixed at 20% per annum. Take e.g if the price of a new car is ₹10,00,000, it will lose 20% of its original value at the end of year one (₹8,00,000). Subsequently, At the end of year two, the depreciated value will further fall down to ₹6,00,000.
Simply put, zero depreciation is an add-on to the comprehensive policy without factoring in the depreciation. If your car gets damaged in an accident, the insurer will cover the entire repair cost disregarding depreciation.

Zero Depreciation Car Insurance: Is it worth it?

Zero depreciation does have an edge over comprehensive insurance. But it comes at a cost. The premium for zero depreciation is approximately 8% to 9% of the IDV (Insurance Declared Value) of the vehicle. Therefore, for a 10 lakh car, a zero depreciation add-on will contribute roughly ₹8,000 to the total premium.
If you have just bought a new vehicle or own a luxury car, paying for zero depreciation is a worthy investment.

Which is the right car insurance for me?

In the end, it all comes down to your requirements. If what you are looking for is affordable car insurance for your city-beater hatchback then comprehensive car insurance is the best for you. Zero depreciation is highly suggested for new or high-value luxury/premium cars as it offers 100% coverage with the provision of add-ons like engine cover, NCB (No Claim Bonus) protection etc. It is strongly advised to read the insurance policy documents and understand the terms and conditions carefully before making a purchase.