Should You Opt for Zero Depreciation Or Comprehensive Commercial Vehicle Insurance?

Every vehicle in India needs to be covered under a motor insurance policy, be it a car, scooter, bike or a commercial vehicle. It helps to avoid a bankruptcy situation in case an accident or an event leads to a major financial loss. Having said that, it is extremely important for commercial vehicles to be insured as any loss will not only destroy the vehicles but may also adversely impact the business. Hence, whether you own passenger-carrying vehicles, such as buses, taxis, etc. or goods-carrying vehicles, such as trucks, tractors, etc. they must be covered under a commercial vehicle insurance policy.

Buying a commercial vehicle insurance policy can be a little confusing thanks to the variety of coverage options available. Today, you have the liberty to purchase third party insurance, comprehensive insurance or zero depreciation insurance for your commercial vehicles. While third party insurance may be simple to understand, people often get confused between zero depreciation and comprehensive commercial vehicle insurance. To help you make an informed decision, this article will clearly explain these two types of commercial vehicle insurance policies and illustrate the difference between the two.

Decoding Comprehensive Commercial Vehicle Insurance

Comprehensive commercial vehicle insurance is a type of motor insurance policy that provides complete protection to a commercial vehicle, such as trucks, trailers, tractors, etc. It safeguards the vehicle from not only third party damages but also from the damages sustained by the vehicle itself. It is a mix of both third party cover and own damage cover making it a complete package. Besides, it also protects the owner-driver of the vehicle against accidental death or disability.

Comprehensive insurance policy for commercial vehicles provides coverage against the following:

  • Damages to the vehicle during accidents, manmade calamities or natural calamities
  • Property damages caused to third parties in an accident
  • Personal injury sustained during an accident
  • Accidental bodily injuries, disability or death of third parties
  • Theft of the commercial vehicle
  • Damages to the vehicle due to a fire or explosion

In other words, a comprehensive commercial vehicle insurance policy covers a vehicle against any event or threat that may pose a financial risk to the policyholder.

You May Also like to Read: Handy Guide for Commercial Vehicle Insurance Renewal

Decoding Zero Depreciation Commercial Vehicle Insurance

Zero depreciation is an add-on cover available under a comprehensive commercial vehicle insurance policy. It is an additional cover that ensures depreciation is not accounted for while estimating the IDV or insured declared value of a commercial vehicle. The value of every vehicle diminishes with time. With zero depreciation cover, a motor insurance company provides an IDV equal to the prevalent market value of the vehicle without estimating depreciation on its parts. In the absence of this cover, the policyholder will receive a claim amount after deducting the depreciating value of the vehicle parts from the IDV.

Therefore, zero depreciation commercial vehicle insurance refers to a motor insurance policy that provides comprehensive coverage to a vehicle without considering depreciating its value over time. It covers all parts of the vehicle, including plastic parts, rubber parts, nylon parts, batteries, tyres & tubes, airbags and fiberglass components against depreciation. All motor insurance companies in India offer zero depreciation cover, which is also known as bumper-to-bumper insurance or nil depreciation cover.

Generally, zero depreciation cover is available for commercial vehicles of up to five years old. Moreover, zero depreciation cover is available as an add-on cover and hence, has to be purchased on payment of a higher premium. This cover is not part of the regular comprehensive coverage and needs to be bought by paying an extra premium amount.

Difference between Zero Depreciation & Comprehensive Commercial Vehicle Insurance

A zero depreciation insurance policy is not the same as comprehensive insurance. To help you get a clearer picture, the following table represents the differences between zero depreciation and comprehensive commercial vehicle insurance policy:

Factors

Comprehensive Commercial Vehicle Insurance

(With Zero Depreciation Cover)

Comprehensive Commercial Vehicle Insurance

Commercial Vehicle Insurance Premium

The insurance premium for a comprehensive insurance policy with zero depreciation cover is higher. This is because zero depreciation is an add-on cover which has to be purchased separately by paying an additional premium amount over and above your regular commercial vehicle insurance premium.

The insurance premium for a comprehensive insurance policy without zero depreciation cover is lower it excludes the cost of buying nil depreciation add-on cover.

Claim Settlement Amount

The claim settlement amount received under comprehensive insurance with zero depreciation cover is higher as the value of your commercial vehicle is not reduced by calculating depreciation on its parts.

The claim settlement amount received under a regular comprehensive insurance policy is lower as depreciating value on the commercial vehicle parts is reduced from the overall IDV.

Age of the commercial vehicle

Only commercial vehicle of up to 5 years old can buy a comprehensive insurance policy with zero depreciation cover

All types of commercial vehicles irrespective of their age can buy a regular comprehensive insurance policy.

Depreciation Rates

With zero depreciation cover, no rate of depreciation applies to the commercial vehicle that results in a higher claim amount.

Under the regular comprehensive policy, depreciation rates will be levied on parts of the commercial vehicle. Moreover, the rate of depreciation will increase with the rising age of the vehicle.

Zero Depreciation Vs Comprehensive Commercial Vehicle Insurance - Which is Better?

A comprehensive commercial vehicle insurance policy with zero depreciation cover is what every vehicle owner should strive for. It helps them obtain a higher IDV for their vehicle for years on payment of a slightly higher premium price. But what is important to note is that zero depreciation cover is available for vehicles of up to five years of age only. This means a commercial vehicle older than five years will not benefit from buying the zero depreciation cover.

Hence, a person should buy a commercial vehicle insurance policy with zero depreciation cover only if his/ her vehicle is brand new or less than five years old. People with commercial vehicles of more than five years old should stick to the comprehensive insurance policy.

In a Nutshell

A comprehensive commercial vehicle insurance policy is designed to provide all-round protection to your goods-carrying and passenger-carrying vehicles. But a comprehensive insurance policy with zero depreciation cover acts as a cherry on the cake as it enhances the coverage level of the commercial vehicle. The only thing to remember is that zero depreciation cover is beneficial only for vehicles of up to five years old and hence, older vehicles should buy a regular comprehensive insurance policy.

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