Zero Depreciation Insurance

Zero Depreciation or Zero Dep. Insurance also called Nil Depreciation is the costliest & most beneficial policy available as on date.  Here, additional premium is demanded over & above the premium charged for vehicle value.

This policy includes Comprehensive as well as Third Party Insurance.  It rather is a extension of Comprehensive Insurance as it is an optional add-on, which can be opted to convert Comprehensive Policy to Zero Depreciation Policy.  This policy compensates Third Party expenses as well as the repairing cost of the damaged vehicle – that too without any deductions for depreciation whatsoever.

It is available for new vehicles only for upto 3 years by most of the companies & 5 years by some companies.  It does offers different options like :

  1. Normal Zero Dep. – Its the cheapest zero dep. version which covers damages to car body.
  2. Engine Zero Dep. – A bit costly as it additionally covers engine & engine fluids in addition to the above.
  3. Consumable Zero Dep. – Its the costliest version with maximum benefits & covering each & every part of the vehicle, even tyres too.

Additional benefits of Zero Dep. Policy are as follows :

  1. Emergency Transport & Hotel Expenses.
  2. Loss of Personal Belonging.
  3. Key Replacement.
  4. Roadside Assistance Cover (Offered by some, while some charge for it).

Other benefits may vary from company to company.

Comprehensive Insurance – Part 02 (Discounts)

There are a few discounts offered in Comprehensive policy which are :

  1. Company Discount.
  2. N.C.B. (No Claim Bonus) Discount.
  3. Occupation & Membership Discount.
  4. Voluntary Deductible.
  5. Anti Theft Device Discount.

Company Discount :

Every insurer offers different % of discount on all brand & model which is called Company Discount.  This discount % varies from insurer to insurer for every particular brand & model from year to year.  Its higher in the initial years & reduces gradually & subsequently.

N.C.B. (No Claim Bonus) Discount :

N.C.B. (No Claim Bonus) Discount is nil/zero in the first year & increases gradually & subsequently – if there is no claim taken over period of time.  Once a claim is filed in a particular year, it starts from nil/zero in the subsequent year.  Discount slab is as under :

N.C.B. Slab

Occupation & Membership Discount :

People involved in Low Risk Occupations (like Scientists, Doctor, Engineers, Teachers, Nurses, Pilots etc.) can avail of Occupation Discount as statistically people in these professions exercise less risky driving behaviors than those engaged in other jobs.

Military Discounts can be availed by Army Personnel while Employees of certain companies can get benefit in form of Corporate Discounts.

Being a member of certain Professional Organisation, Auto Clubs (like A.A.I.), Credit Union (like Banks) etc. entitles you to pre-specified Membership Discounts.

Some companies also offer Age Discount.

Voluntary Deductible :

If you opt to bear a certain amount of loss on every claim you make, then that is called Voluntary Deductible & it entitles you to certain discount in your premium.

Voluntary Deductible

There is a Compulsory Deductible in every policy, the amount of which varies depending upon vehicle type.  If you opt for Voluntary Deductible then you got to bear the loss of Voluntary Deductible + Compulsory Deductible in every claim you make.

Anti Theft Device Discount :

If the vehicle is fitted with Anti Theft Devices approved by A.R.A.I. (Automobile Research Association of India) then Vehicle Owner is entitled for discount of 2.5% of O.D. Premium or max. of Rs. 500/-.

Comprehensive Insurance – Part 01 (Valuation)

Also known as First Party Policy or Package Policy – it is one level higher & is costly than Third Party Insurance, as valuation of the vehicle is done & additional premium charged for insuring the vehicle upto that value.  This part of Premium is termed as O.D. (Own Damage) Premium & is derived after applying all add-on charges/discounts/loading etc.

I.D.V. (Insured Declared Value) is the sum insured, upto which value the claims can be paid for in a particular policy period.  It is fixed at the time of policy issuance & derived on the basis of listed selling price of brand & model for the first year & later on :

  • 10% depreciation is applied each subsequent year.
  • Pre-defined values, reviewed on regular basis, are used.
  • Following table is used.

T.L. & C.T.L. I.D.V. Chart

For the T.L. (Total Loss) or C.T.L. (Constructive Total Loss) vehicles valuation is done on the basis of these numbers only.  A vehicle is considered as C.T.L. when the retrieval/repair cost exceeds 75% of the I.D.V.

If any additional Accessory (like Side Car in Two Wheelers, Alternate Fuel Kit (C.N.G./L.P.G.) in Cars or any such other accessory) is used then its valuation is also done as per above method.

Optional add-on is also offered along with this policy which comes in handy for the Vehicle Owner, its R.S.A. (Road Side Assistance).

R.S.A. (Road Side Assistance) :

When will the vehicle break down or when some unfortunate event would take place, is a thing which can’t be anticipated or avoided, this is where R.S.A. comes in handy.

R.S.A. provides 24×7 spot assistance in case of any unforeseen situations by offering medical co-ordination & legal advice (if required) in addition to mechanical assistance, fixing flat tire, minor repairs, towing assistance etc.

On paying additional premium (varies from company to company) Vehicle Owner can avail this benefit.

Third Party Insurance

Third Party Insurance is also known as T.P. Policy or Liability Only Policy.  It is the basic insurance policy as well as the cheapest insurance option available.

This policy does not evaluates the vehicle or any other accessories installed, so no claim whatsoever is entertained for damage to the same under any circumstances.  The premium charged is only for covering the following risks :

  1. Third Party Liability.
  2. Personal Accident.
  3. Alternate Fuel.

Third Party Liability :

All damages done to any another person/property by the insured vehicle are Third Party damages & are payable under this policy.  Premium varies depending on Vehicle Category based on their :

  • No. of Wheels – 2 Wheeler, 3 Wheeler, 4 Wheeler etc.
  • Cubic Capacity – Below 1000 CC, 1000 – 1500 CC, Above 1500 CC etc. (Cars).
  • Nature of Use – Private, Public, Goods Carrying, Passenger Carrying, Miscellaneous etc.
  • & more.

These premiums are decided by I.R.D.A. (Insurance Regulatory & Development Authority) & renewed time to time on yearly basis.

Compensation can be claimed in case of Third Party damage, injury or death once the F.I.R. has been filed.

Personal Accident Insurance :

Accidents can happen anywhere, anytime & to anyone, especially while commuting.  Driver, Cleaner & Passengers do travel in the vehicle & in case of any unfortunate event they may lose their life.  It can be, that the person commuting in the vehicle is the only bread winner in his/her family & they may have to suffer severe financial losses in addition to the emotional loss (which is non measurable in terms of monetary compensation).

In order to provide some financial stability & security to the family of the deceased, insurers offer Personal Accidental Cover along with the Motor Policy.  Depending on the choice of Vehicle Owner, he may pay additional premium to cover :

  • Driver.
  • Cleaner.
  • Passengers.

Compensation can be claimed only in case of death & no claim is entertained in case of injury.

Alternate Fuel Insurance :

Vehicles are manufactured to run on conventional fuels like Petrol & Diesel but nowadays C.N.G. & L.P.G. are also used to run automobiles as their running cost is low.  Additional premium is therefore charged for these fuel types.

Hence we can conclude that Third Party policy simply covers the liability payable to the Victim (other person involved) in unfortunate event of an accident & no claim of any sort is payable to the Vehicle Owner for damage to his own vehicle however the other victims (driver/cleaner/passenger) can be insured & they will get compensated in case of death.

Understanding Motor Insurance

With the advent of technology in the field of automobiles, comfort (safety & luxury) has increased many fold in the way we commute & so has the vehicle maintenance & repairing costs.  Motor insurance is most important for all vehicle owners – as it protects them from huge repairing bills in unfortunate event of an accident.

Before we understand different policies, we should know who all are involved in the process of getting insured & procuring claim.  There are 2 parties involved in Getting Insured & 3 parties involved during Claim. These parties are namely :

  1. First Party – Vehicle Owner who purchases the Insurance Policy.
  2. Second Party – Insurance Company which covers the risk by selling the Insurance Policy.
  3. Third Party – Victim (other person involved) in unfortunate event of an Accident.

Now, let’s move forward to understand what options are available with the vehicle owners to get their daily & highly used asset insured.  There are 3 types of Motor Insurance available which are as follows :

  1. Third Party Insurance.
  2. Comprehensive Insurance.
  3. Zero Depreciation Insurance.

Third Party Insurance :

Third Party Insurance also known as T.P. Policy or Liability Only Policy is the basic insurance policy apart from being the cheapest option available.

This policy simply covers the liability payable to the Victim (other person involved) in unfortunate event of an accident & no claim of any sort is payable to the Vehicle Owner for damage to his own vehicle however the driver is insured & does gets compensated in case of death.

Comprehensive Insurance :

Also called First Party Policy or Package Policy – it is one level higher & is costly than Third Party Insurance, as valuation of the vehicle is done & additional premium charged for insuring the vehicle upto that value.

In addition to facilitating payment of claims to the Third Party, this policy compensates Vehicle Owner for the repairing of his damaged automobile but after making depreciation deductions according to the age of the vehicle & its damaged parts.  Different parts like glass, plastic, metal, rubber etc carry different depreciation %  which also varies according to vehicle age.

Zero Depreciation Insurance :

Zero Depreciation or Zero Dep. Insurance is the costliest & most beneficial policy available as on date.  Here, additional premium is demanded over & above the premium charged for vehicle value apart from the Third Party charges.

This policy compensates Third Party expenses as well as the repairing cost of the damaged vehicle – that too without any deductions for depreciation whatsoever.