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Difference between own damage and zero depreciation car insurance

Team AckoMay 17, 2022

When you set out to buy a car insurance policy, the two most common terms you will hear (or read) are “own damage” and “zero depreciation”. These terms define the extent of your policy’s coverage and decide how the claim amount will be calculated. Let’s deep dive into what own damage and zero depreciation in car insurance are and how different these two concepts are from each other.

Difference Between Own Damage and Zero Depreciation Cover

Own damage insurance vs zero depreciation car insurance

You can get car insurance coverage for own damage only if you buy a Comprehensive Plan. On the other hand, you need to separately buy the Zero Depreciation car insurance add-on to get coverage against depreciation on the vehicle. Both covers help you get more out of your car insurance plan. Let’s understand in detail what is the meaning of Own Damage and Zero Depreciation.

What is Own Damage insurance?

There are two major types of coverages offered under a car insurance policy. First is the mandatory, Third-party Car Insurance Policy, and the second one is Own Damage Cover. 

The former will help you cover third-party losses like property damage, injury, or death. But it does not cover your car against damages. That is the job of the Own Damage cover. You can claim damage to your car only if you have a Comprehensive Car Insurance policy, i.e. only if it covers Own Damage. 

What is Zero Depreciation in car insurance?

To understand Zero Depreciation, we must first know what depreciation is. Depreciation refers to the decrease in the car’s value with time. It is important to not only price your policy during car insurance renewal but also plays a huge part in the case of claims. 

The insurer will deduct the applicable depreciation from your car insurance claim. This is where zero or nil depreciation comes into the picture. You can get more claim amounts if your car has extensive damage, as the insurer will not deduct the depreciation applicable to the car.

Questions Own Damage Zero Dep Car insurance
How is depreciation calculated for a car's age? Depreciation will increase with an increase in the car's age. The car's age will not matter with the Zero Depreciation policy until its validity.
How is the cost of car parts calculated during car insurance claims? There will be depreciation on car parts as per their type and car's age. This will be deducted from the claim amount. The depreciation on car parts will not be taken into consideration.
Do I need to pay a higher premium? No, the own damage premium is comparatively lower than the premium for a Zero Dep policy. Yes, the premium on a Zero Dep policy is higher as compared to the premium for the own damage cover.
Is the claim amount higher? No, the claim amount will be lower. Yes, the claim amount will be higher.

To simplify both concepts, let’s go back to see what happened when the two people with a similar car model made a claim. 

Since they both bought their cars in the same year, a similar amount of depreciation was applicable to the vehicles. Coincidentally, they both also damaged their cars on the same turn on the road a few months apart, so the damage was similar. 

The claim amount of the person with the Own Damage cover received less claim amount than the other person who had a Zero Dep policy. This is because depreciation decreased the claim amount for the former.

Also, read: Difference Between Third Party vs Zero Depreciation Car Cover

Who needs Zero Dep and Own Damage Insurance?

Now that you understand the difference between own damage and zero depreciation, let’s move on to the list of people that will benefit from buying these two types of policies.

Who needs Own Damage cover?

Here is a list of situations when you can go for a basic Comprehensive Car Insurance Policy with Own Damage cover.

  • If your car is beyond the age of 5 years and the insurance company is not ready to offer a zero dep policy.

  • If you are on a tight budget for buying car insurance.

  • If you use the car very rarely.

  • If you are a safe driver and follow all the traffic laws to the best of your ability.

Who needs Zero Dep insurance?

Here is a list of situations when you can go for a Comprehensive Car Insurance Policy with Zero Depreciation Cover.

  • If you own a new car that is less than 5 years old.

  • If you own a luxury car with expensive car parts.

  • You can stretch your car insurance budget to accommodate additional coverages.

  • If you are a new driver and are learning to drive.

Frequently asked questions

Following is a list of common questions related to own damage and zero depreciation car insurance. Please feel free to contact us via email at [email protected] if you would like us to answer more of your questions.

Is declaring the IDV important for buying Zero Dep insurance? 

Yes, IDV, which stands for Insured Declared Value, is the approximate current market price of the car. You (the car owner) need to set this value while buying the policy, and it helps to decide the claim amount in case of a major claim. For example, when the car is damaged beyond repair or when car theft occurs.

I accidentally damaged my car while driving. Can I still claim against my car insurance policy?

Absolutely yes! The Own Damage cover plays an important role in situations like these. So, if you have a Compressive Car Insurance Policy, then you can claim for the damages suffered by the car.

What is the validity of the Zero Dep Car Insurance Policy?

The validity of a car insurance policy can be one, three, or five years depending upon the plan you choose. But, since Comprehensive long-term policies are more expensive as compared to an annual policy, people prefer to go with the less expensive option.

Are tyres and brake pads excluded from depreciation in the Nil Depreciation policy?

No, things like tyres and brake pads usually wear out with time. They are not taken into consideration while calculating the claim amount for Zero Dep insurance. So the car owner needs to bear the cost of repairing or replacing the parts unless they get damaged during an accident.

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