• Due to typical wear and tear, the worth of the vehicle decreases over time. The vehicle diminishes in value as it gets older. This also influences the settlement of claims.

Curious about the reason?

• Let us clarify for you. Imagine that your vehicle is involved in an accident. You would file a claim if you hold a car insurance policy. At this point, there is a possibility that you may not recover the full costs for the parts that have been replaced.

• Puzzled? This situation arises because the insurance company covers the repair costs only after subtracting the depreciation amount of the car parts. This means that you would be responsible for paying the remaining balance of the repair bill out of your own funds.

• However, you can reclaim the entire cost of the replaced parts. This is achievable only if you possess a zero depreciation car insurance policy.

What does Zero Depreciation in Car Insurance mean?

• The depreciation cover is also known as nil depreciation or bumper-to-bumper cover.

• Zero depreciation is an additional cover that allows the motor insurance provider to settle the claim without factoring in the depreciation of the various car parts. This increases the claim amount for the policyholder and can be utilized for a limited number of times during the policy duration. It’s advisable to compare car insurance rates and make an informed decision.

Advantages of Zero Depreciation Car Insurance Cover

• With a zero depreciation cover, you receive the maximum settlement for your claim amount. You only have to cover the cost of mandatory deductions.

• A zero depreciation policy provides coverage to your car in addition to the protection offered by your current car insurance policy.

• A nil depreciation cover contributes to enhancing your savings when submitting a car insurance claim.

• If you did not obtain a zero depreciation cover at the time of purchasing your policy, you can acquire it during the renewal of your car insurance.

How is Depreciation Calculated?

IRDAI has established depreciation rates for cars operating on Indian roads. Below is a summary of the depreciation rates used to calculate a car’s depreciation:

• For fiberglass components: 30%

• Nylon, rubber, batteries, and plastic parts: 50%

• For wooden parts: In the first year – 5%, second year – 10%, and so on.

Rate of Depreciation for All Parts Approved by IRDAI

For Metallic Parts

*Standard Terms and Conditions apply.

What is excluded from a Zero Depreciation Add-on Cover?

• Regular wear and tear, including aging, rust, and gradual deterioration, is not included.
• Mechanical and electrical breakdowns, such as engine issues or wiring problems, are not included.

• Damage resulting from operating a vehicle while intoxicated, engaging in illegal activities, or carelessness is not covered.

• Tire and battery replacements are typically excluded unless they were harmed in an accident.

• Damage to the engine and gearbox from hydrostatic lock, oil leaks, or insufficient lubrication is not included unless you possess an engine protection cover.

• Secondary damages, such as engine failure due to delayed maintenance, are not covered.

• Certain insurers restrict the number of zero depreciation claims, generally permitting only two each policy year.

• Minor dents, scratches, and cosmetic repairs that do not affect the functionality of the vehicle may not be included.

Also Read: How Does a Zero Depreciation Cover Help During Car Insurance Claims?

Difference Between Comprehensive Car Insurance Policy and a Car Insurance Policy with Zero Depreciation Cover

Important Things to Remember Zero Depreciation in Car Insurance

• Covers Full Claim Amount: Unlike typical policies, zero depreciation insurance does not deduct depreciation on replaced components during a claim.

Higher Premium: Zero depreciation cover incurs a higher expense than ordinary comprehensive insurance due to its enhanced features.

• Best for New and Luxury Cars: Excellent for new, high-end, and costly vehicles, ensuring you receive the maximum claim payout.

Requires Comprehensive Policy: Zero depreciation cover can solely be attached to a comprehensive insurance policy, not third-party insurance.

Check Insurer’s Terms: Various insurers have differing terms regarding vehicle age, claim limits, and covered parts, so always examine the policy details prior to purchase.

How does zero depreciation cover affect the premium of your car insurance policy?

Your car insurance rates are based on the following elements:

• IDV (Insured’s Declared Value) of the vehicle

• NCB (No Claim Bonus), if applicable

• Liability premium of your vehicle, which may fluctuate annually

• Cubic capacity (cc) of the vehicle

• Geographical region