Published: Jul 29, 2022, 9:25am
While the Motor Vehicles Act, 1988 mandates third-party coverage, having a comprehensive policy is recommended for vehicle owners. The reason is simple. With a comprehensive policy, you get coverage against third-party liability and the damages that your vehicle might suffer in an accident or due to any natural and man-made calamity.
With comprehensive motor insurance plans, you get the option of add-ons. Add-ons are optional and provide additional coverage features that help enhance the scope of the policy. One such add-on, which is popularly available with all comprehensive motor insurance plans, is the zero-depreciation add-on. When you add this cover to your base policy, you get a 360-degree policy. It is also called a bumper-to-bumper insurance policy.
Bumper-to-bumper insurance is simply the comprehensive motor insurance policy to which the zero depreciation add-on is added. Under bumper-to-bumper insurance plans, the claim amount is higher because the insurer does not deduct depreciation from the parts of the vehicle that have been repaired or replaced.
To buy the bumper-to-bumper insurance policy, you can choose the comprehensive coverage and add the zero depreciation cover to make the policy all-inclusive.
Though comprehensive, motor insurance plans do not cover depreciation due to normal wear and tear and usage. As such, in the case of a claim where the vehicle is repaired, the depreciation incurred on the parts of the vehicle is deducted from the claim amount. Contrary to this, the garage charges the full amount. In the end, you need to foot the cost of the depreciation that the insurance company has deducted.
When it comes to the rate of depreciation, there is a table based on which insurers deduct the depreciation amount. This table shows the different parts of the vehicle and the respective depreciation on them. Have a look –
These rates of depreciation are considerable. You might end up paying for more than 50% of the incurred cost of repairs as the insurer excludes the depreciation amount. In the case of heavy damages, the repair cost can easily run into tens of thousands. If you pay for depreciation, you can end up suffering a considerable loss. Thus, the zero depreciation cover add-on or a bumper-to-bumper insurance policy proves useful to cover this loss.
Let’s understand with the help of an example.
Say you own a car (vehicle age :12 years) which suffers damage due to a collision. The bonnet of the car gets damaged considerably, and you give the car for repairs. The repair costs are categorised as follows –
When you raise a claim for this amount, the insurance company will calculate the admissible amount of the claim after deducting depreciation. So, here’s how the claim amount would be calculated –
As is evident, against the claim amount of INR 55,000, you get a settlement of INR 30,500, which also overlooks the compulsory deductible, further increasing your out-of-pocket expenses.
The claim amount increases considerably if you opt for the zero depreciation add-on and convert the comprehensive plan to a bumper-to-bumper cover. The deduction for depreciation would not happen, and you get a claim for the total cost of repairs, i.e., INR 55,000. You would only pay the amount of compulsory deductible, i.e., Rs.1000 (assuming the engine capacity of the car is up to 1500 cc). The rest INR 54,000, would be covered by your bumper-to-bumper policy.
A bumper-to-bumper cover gives you the following benefits –
Since the coverage pays for the depreciation costs as well, your out-of-pocket expenses are reduced. As such, you can safeguard your financial assets and hard-earned income and get financial relief even in the most damaging instances.
The bumper-to-bumper cover enhances the claim amount. A higher claim amount makes your motor insurance policy more comprehensive, especially when you own a premium vehicle where the repair costs can be very high.
The zero depreciation add-on costs a fraction of the motor insurance premium. As such, it is affordable. Moreover, the coverage offered far outweighs the small additional premium you have to pay to avail of the coverage
Lastly, the zero depreciation add-on makes your motor insurance policy inclusive. It adds the layer of security that you seek from the coverage and gives you complete peace of mind.
While the bumper-to-bumper policy provides you with a comprehensive scope of coverage, here are a few aspects of the coverage that you should know about –
The zero depreciation add-on is usually available only for cars and bikes that are aged up to 5 years.
2. Frequency of claims
Insurance companies might restrict the total number of zero depreciation claims that they would pay. Under most plans, the bumper-to-bumper coverage is available up to two times during the policy period. However, nowadays, many insurers offer unlimited bumper-to-bumper claim settlements. Such plans have the edge over regular plans that limit the frequency of claims and are, thus, recommended.
3. Coverage exclusions
There are some instances when the bumper-to-bumper cover would not be applicable. These instances include the following –
Claim instances that are not covered under the policy. For instance, drunk driving, driving without a license, etc.
a. Replacement of specified parts of the vehicle, like tyres and tubes.
b. Cost of consumables.
c. Compulsory deductible
d. Voluntary deductible (if chosen)
4. Total loss or theft:
If the vehicle suffers total loss or is stolen, the losses you incur would not fall under the purview of bumper-to-bumper cover. In such cases, the zero depreciation claim would not be applicable.
As mentioned earlier, the bumper-to-bumper cover is quite popular and is, thus, offered by almost every insurance company offering a motor insurance plan. So, choosing the right bumper-to-bumper cover becomes important, especially when so many options are available.
So, here are some tips that would help you buy the right bumper-to-bumper insurance policy for your vehicle –
A. Compare the scope
Firstly, compare the scope of the zero depreciation add-on. As stated earlier, some plans limit the number of bumper-to-bumper claims while others don’t. So, check if there are coverage limitations. Try and opt for a plan which allows unlimited bumper-to-bumper claims for maximum protection.
B. Check the premium
The zero depreciation add-on is priced differently across different insurers. So, compare and check the premium that each insurer is charging. Compare the premium of the add-on with the premium of the base policy. Choose a plan that offers the most competitive premium rate so you get the best deal.
C. Check the claim process
Nowadays, many insurers have simplified their claim process by introducing features like –
a. Doorstep pick-up and delivery
b. Overnight repairs
c. App-based claim intimation
d. Quick approval and settlements, etc.
Check these claim-related features that the insurers are offering. Choose a company with the simplest claim process so your vehicle gets easily repaired, and you get the settlement at the earliest.
A comprehensive policy is one that covers third-party liabilities and the damages that your vehicle might suffer. On the other hand, a bumper-to-bumper policy is a comprehensive one with a zero depreciation add-on. This is the primary difference between these two plans. Other differences include the following –
A bumper-to-bumper policy provides an all-around coverage to your vehicle and increases the claim amount by covering the cost of depreciation. So, the policy is recommended to avoid considerable out-of-pocket expenses at the time of claims.
Assess the bumper-to-bumper cover offered by different insurance companies and compare the plans on three main parameters – coverage, cost and claim process. Choose the most suitable bumper-to-bumper policy for your vehicle and give it the protection it deserves.
Dhirendra Mahyavanshi is the co-founder of insurtech company Turtlemint. He has over 16 years of experience in the insurance, e-commerce and fintech sector. Mahyavanshi is an alumnus of IIM- Calcutta and has a bachelor’s degree in engineering from DJ Sanghvi College of Engineering.
Aashika is the India Editor for Forbes Advisor. Her 15-year business and finance journalism stint has led her to report, write, edit and lead teams covering public investing, private investing and personal investing both in India and overseas. She has previously worked at CNBC-TV18, Thomson Reuters, The Economic Times and Entrepreneur.
Published: Jul 29, 2022, 9:25am