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A Complete Guide About Zero Depreciation Cover In Car Insurance Policy In India

A Complete Guide About Zero Depreciation Cover In Car Insurance Policy In India

Car insurance works to cover your precious car from suffering any damages that could be caused by any kind of mishap or untoward situation such as an accident, floods, earthquake, fire, riots or any other natural calamity or man-made disaster, as well as a complete loss in case your car gets stolen. Vehicle insurance also protects you from damages or loss caused by your vehicle to a third-party.  

When you purchase vehicle insurance you naturally want o get the best possible protection for your car. One of the ways to ensure this is by having a zero depreciation cover in your car insurance policy. Zero depreciation cover is an important and beneficial add-on feature and one you should definitely include when buying car insurance.   

This article will act as complete guide to zero depreciation by covering its various aspects and how it affects your car insurance policy.

Understanding Vehicle Depreciation and Zero Depreciation

Depreciation means the loss of value of a vehicle over time, in this case your car particularly if you have bought a new car. This loss of value due to usage and normal wear and tear actually starts from the moment that you brand new car leaves the showroom. All insurance companies take into account the depreciation of the vehicle while calculating the policy premium and at the time of settling a claim.

The table below gives you an at-a-glance snapshot to understand how the loss in value or depreciation happens over time as your car gets older.

Depreciation Schedule

Age of the Vehicle

% of Depreciation

Not exceeding 6 months


Exceeding 6 months but not exceeding 1 year


Exceeding 1 year but not exceeding 2 years


Exceeding 2 years but not exceeding 3 years


Exceeding 3 years but not exceeding 4 years


Exceeding 4 years but not exceeding 5 years


Exceeding 5 years but not exceeding 10 years


Exceeding 10 years


Zero depreciation cover in car insurance is offered as an add-on cover when you buy a comprehensive car insurance policy. Having a zero depreciation cover enables you to minimise the effects of vehicle depreciation. 

How Zero Depreciation Works

Zero depreciation add-on cover, also called nil depreciation or bumper to bumper car insurance, takes care of the loss in value of your car due to wear and tear and gives you better car insurance coverage.

Suppose your car gets damaged in an accident and the garage or workshop informs you that certain parts are beyond repair and will need to be replaced completely. In such a situation, if you have a zero or nil depreciation add-on cover in your comprehensive car insurance policy, it will save you from paying from your own pocket for the repair and part replacement expenses of your car which could amount to quite a bit. The insurance company will pay 100% of the expenses with nil or zero amount deduction for part depreciation.

If you do not have zero depreciation cover, the insurance company will pay only partly for the repair and replacement of depreciable parts while settling your claim. The rest of the cost will have to borne by you.

Here is how your car parts are affected by depreciation. These are the depreciation rates set by the insurance regulator IRDAI.

Depreciable Vehicle Parts

% of Depreciation

Rubber, nylon, plastic parts, tyres, tubes and batteries


Fibre glass material components


Wooden parts

5% (1st year), 10% (2nd year)

Glass parts



Benefit of Zero Depreciation

It is definitely worth paying the extra amount for getting a zero depreciation add-on cover with your comprehensive car insurance plan because it completely justifies the slightly higher premium charged by your insurer in return for the following benefits. These are the benefits you get with zero depreciation cover:

  • Ensures that the insurance company fully covers the cost of repair and replacement of vehicle parts such as fibre glass components, rubber, nylon / plastic parts, battery, tyres and tubes, metal and glass parts, without deducting depreciation.
  • The policyholder does not need to pay anything extra at the time of raising a claim.
  • Gives an extra layer of protection for your brand new and expensive car
  • Adds more value than buying standard car insurance 

In a way if you look at it, including zero depreciation cover in your comprehensive car insurance policy, makes your car an ageless beauty since the insurer will not take the car’s age into consideration when processing your claim for damages.

How to Get Zero Depreciation Cover

You can get zero depreciation cover at the time of purchasing a new comprehensive car insurance policy or you can apply for it when renewing your current policy. The validity of a zero depreciation add-on cover is for a year after which you will need to get it renewed.