What is the difference between Comprehensive and No Depreciation insurance?



Auto insurance is defined as a contract between the insured and the insurance company that protects the insured against financial loss in the event of an accident or theft of the auto. In exchange for paying a premium by the insured, the insurance company agrees to pay the losses as outlined in the insurance policy.

Basic personal auto insurance is compulsory by most U.S. states, and laws vary. Auto insurance coverages are priced individually to let you customize coverage amounts to suit your exact needs and budget. Here we will discuss the difference between comprehensive and no depreciation insurance. Policies are generally issued for six-month or one-year timeframes and are renewable.

What does Comprehensive Insurance mean?

Comprehensive insurance is an extensive motor insurance policy that covers any damage to the vehicle, its occupants, and the ‘third party, in case of any mishap. It also provides coverage against loss or damages of the vehicle from vandalism, fire, falling objects, floods, or any other natural disaster.

Similar to most insurance policies, comprehensive coverage is subjected to limits. The coverage limit is the maximum amount that an insurance policy pays toward a covered claim. The limit on comprehensive coverage is typically the actual cash value of the vehicle (original value of the vehicle minus depreciation). Depreciation is the decrease in the cost of your car, due to its natural wear and tear due to its age. The older the car is, the higher is its depreciation value. It can be better understood by the following example:

Suppose, your vehicle is stolen. Your insurer would reimburse you for your vehicle’s depreciated value, minus the deductible that you selected at the time of purchasing the insurance policy. In other words, if you want to replace your stolen vehicle with a newer one, you would likely have to use some of your own money to do so in addition to using the reimbursement coverage from your insurance company.

No Depreciation Coverage

No Depreciation or Zero Depreciation is an ‘Add on’ cover to the insurance policy. In other words, it is an added benefit that can be bought with Comprehensive Insurance.
Comprehensive Insurance + Zero Depreciation = No Dep Coverage

No depreciation, also known as Nil depreciation or Bumper to Bumper car insurance is a car insurance policy that leaves out the depreciation factor from the coverage. It means that if an insured car gets damaged following a collision or any other mishap, no depreciation is subtracted from the coverage of any body parts of the car. The insurance company will reimburse the entire cost of the body part for replacement.

Difference between Comprehensive and No depreciation insurance policy

Factors Comprehensive Policy Comprehensive Policy + Zero Depreciation Cover
Premium Amount Premium will be lower. Premium will be higher than a comprehensive policy without the depreciation cover.
Depreciation Rates With the age of the vehicle, the increasing depreciation rate will be applied to the vehicle’s value and the claim amount will be reduced. The depreciation rates will not be applicable to the vehicle so no reduction in the claim amount due to depreciation.
Claim Settlement Amount Lower claim settlement amount as depreciation is applied on some body parts. Higher claim settlement amount as depreciation rates are considered as nil.

Thus, the no depreciation reimbursement cover reimburses or compensates you the amount of claim that gets deducted due to depreciation.

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