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What is the Difference Between Own Damage and Zero Dep?

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While purchasing insurance for the two-wheeler, it is a common issue to understand terms like own damage cover and zero depreciation bike insurance. Comparing both, they offer financial security for your bike, and the differences outlined here will assist in your choice. This blog will reveal the detailed differences between own damage and zero depreciation covers and which one will be suitable for you.

What is two wheeler own damage insurance?

A bike insurance policy helps to cover all your expenses which may occur due to vehicular damage. Nevertheless, the policy that you choose determines whether you will receive a cover for that particular damage or not. In accordance with the Motor Vehicles Act of 1988, every bike owner is supposed to have third party cover but here you will only get coverage for the third party’s liabilities.

However, if you select own damage insurance for your bike, then the insurer will pay for the damages arising due to accidents, fire, theft, burglary, natural calamities, man-made events and so on. To get the reimbursement towards the expense done for repair and the cost towards replacement of parts which got damaged due to any of insurable risk, it becomes necessary to take a standalone own damage bike insurance policy excluding the third party bike insurance. When buying this insurance, you can take extra add on covers like zero dep, invoice cover etc. to get better coverage.

What is zero depreciation bike insurance?

Zero depreciation is an add on cover in a bike insurance policy in which the policyholder gets full reimbursement for the parts and components of the car without factoring in the depreciation cost. Comprehensive bike insurance comes with an additional option of zero depreciation cover that you can go for.

Normally in settlement of a claim, an insurer will in most cases, offset the price of depreciated parts that are to be replaced. Nevertheless, in matters concerning zero depreciation insurance, no such deduction is afforded, and a 100% claim is given. The majority of the vehicles are depreciating assets. For instance, the bike with usage drops in value gradually as they are being used. This causes the total value of the asset to reduce, which is a process referred to as depreciation. Zero Depreciation insurance covers the depreciated value. In a claim, there is no depreciation deduction and the insured gets the full settlement as per the other policy conditions.

Thus, a total claim can be obtained from the insurer without the deduction of the depreciated vehicular part through the help of this add on cover.

Differences between own damage insurance cover and zero depreciation

Own damage and zero depreciation insurance are two kinds of covers that have some main differences.

While both covers offer financial safety nets, understanding how they differ helps choose what’s best for you.

1. Scope of Coverage

◦ Own Damage

This coverage entails a bike owner getting compensated in the event the bike is damaged, stolen or missing

◦ Zero Dep

Limited cover, only the option of excluding the right to reimbursement of depreciation for own damage repairs. This is an optional add-on.

2. Depreciation Rules

◦ Own Damage

In case of the replacement of the damaged parts, the insurance company applies depreciation on the parts.

You pay it from your pocket means you are responsible for bearing the costs of the project from your own resources.

◦ Zero Dep

Insurer eliminates the concept of depreciation to the extent that it is completely done away with.

It states that you get the full claim amount as an option.

3. Premium Costs

◦ Own Damage

A reasonably low fixed price for a compulsory contract.

◦ Zero Dep

This means marginal extra premium over basic third party insurance as an additional feature.

4. Claim Settlement

◦ Own Damage

This amount is paid according to the terms and conditions of the policy taken by the person.

◦ Zero Dep

Additional coverage to ensure that the actual amount is paid without any reduction due to wear and tear.

Here is an example of how own damage cover and zero depreciation cover are calculated.

1. Let us say, the insured meets with an accident and files a claim for Rs. 2 lakhs. The depreciation value of the parts, for example, is Rs. 30,000. In case of an own damage car insurance, the claim will be settled for Rs. 170,000 subject to other deductibles and calculations as per policy conditions.

2. In case of a zero depreciation add-on cover, the entire claim without taking into consideration the parts’ depreciation would be eligible for payment. Thus, the claim will be settled at Rs. 2 lakhs subject to other deductibles and calculations as per policy conditions.

Finally, it can be stated that zero depreciation indeed assists in learning the full cost without reductions proportional to the terms of the add-on and policy.

Which is more advantageous?

Your insurance needs to determine which cover suits you better:

1. Opt for two wheeler own damage cover if:

◦ You would like ordinary legal protection on the financial aspect.

◦ Not a fan of paying extra premiums for what they refer to as add on covers.

◦ Can absorb depreciation costs in the course of making claims

2. Choose zero dep if:

◦ You seek a broader reach for repair expenses

◦ Lacks the capability to claim depreciation on the parts

◦ Desiring easier claim processing of claims without having to make some of the cuts

3. You can also get both covers based on:

◦ Bike’s Age: Older bikes are the ones that profit most from zero dep.

◦ Claim History: First-time buyers can therefore avoid these peripherals.

◦ Budget: Include zero dep only if the hike of premium is tolerable by one's pocket.

While protecting your bike from damage and deprecation are key parts of coverage, it is important we shift gears and look at the bigger picture of insurance:

1. Third party bike insurance

This is mandatory in India and covers your legal liability for damages caused to third parties (other vehicles, people, or property) due to an accident.

2. Personal accident cover

Provides financial protection to you, the rider, in case of death or disability due to an accident.

3. Additional add-ons

Beyond zero depreciation, various additional add-ons can be purchased to enhance your coverage, such as roadside assistance, key replacement, and helmet cover.

Tips for an optimal policy

1. Compare, Contrast

Do not rush into the first policy you see or is recommended to you. Research around to compare the various plans with the best one to work with.

2. Read the Fine Print

Fully grasp any terms and conditions provided before signing, specific exclusions, deductibles, and coverage limitations.

3. Stay Connected

To avoid complications, inform your insurer of any changes in regard to the bike, for instance, new ownership, modifications etc.

4. Mind Your Miles

Engaging in safe riding has long-term repercussions on your premium levels.

Conclusion

Own damage forms the basic level of your bike insurance, zero depreciation is the added layer of shield. In most cases, it is wiser to consider the following when evaluating both covers. It is possible that your priorities are best met by insuring a bike that is older, or one that offers the best possibilities for claim. This ensures that you get an adequate cover that will suffice without necessarily enrolling for some extra unnecessary features.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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