Everything You Need to Know About Zero Depreciation Car Insurance

Due to regular wear and tear, the value of the car depreciates with time. The car loses its value as it ages. This also affects the claim settlement. Wondering, why? Let us help you understand. So suppose that your car meets with an accident. You would raise a claim if you have a car insurance policy in place. Now, there are chances that you may not be able to recover the complete costs of the parts which have been replaced. Confused? This will happen because the insurance company pays the repair bill only after deducting the car parts depreciation amount. It implies that you would need to pay the remaining amount of the repair bill from your pocket. Yet, you can recover the complete cost of the parts that have been replaced. This is possible only when you have a zero depreciation car insurance cover. Let us dig into understanding more about zero depreciation Car Insurance. But before that let us get the basics clear.

What is Depreciation in Car Insurance?

In simple words, depreciation in car insurance is the value decrease of the car. A common reason for it is the natural wear and tear that happens with time. It means that the older the car, the higher is going to be the depreciation. The motor insurance companies deduct the depreciation amount when settling the insurance claims which reduces the claim amount.

What is Zero Depreciation in Car Insurance?

The depreciation cover is also referred to as the nil depreciation or bumper to bumper cover. The zero depreciation is an add-on cover that makes the motor insurance company settle the claim amount. It is done without taking the depreciation on the different parts of the car into contemplation. This enhances the claim amount of the policyholder and can be availed for a specified number of times during the policy term. You should also Compare Car Insurance rates and make an informed choice.

Benefits of Zero Depreciation Car Insurance Cover

1. A zero depreciation cover saves you from paying a hefty amount towards the repair/replacement of the parts of your car, following an accident, which you have to pay otherwise.
2. With a zero depreciation cover, you get maximum settlement of your claim amount. You just have to bear the cost of mandatory deduction.
3. A zero depreciation provides coverage to your car over and above the coverage provided by your existing car insurance policy.
4. A nil depreciation cover helps to increase your savings when you file a car insurance claim.

If you haven’t purchased a zero depreciation cover while buying a policy, you can avail it during car insurance renewal.

How is the Depreciation Calculated?

IRDAI has set depreciation rates for the cars plying on Indian roads. Here is a rundown of the depreciation rates based on which the depreciation of the car is calculated:

• For fiber glass components: 30%
• Nylon, rubber, batteries, and plastic parts: 50%
• For wooden parts: In the first year- 5%, second year- 10% and so forth

Rate of Depreciation for All Parts Approved by IRDAI

Vehicle Age	Depreciation Percentage
Not exceeding 06 months	5%
Exceeding 06 months but not 01 year	15%
Exceeding 01 year but not 02 years	20%
Exceeding 02 years but not 03 years	30%
Exceeding 03 years but not 04 years	40%
Exceeding 04 years but not 05 years	50%

For Metallic Parts

Vehicle Age	Depreciation Percentage Value
Below 06 months	Nil
Exceeding 06 months but not 01 year	5%
Exceeding 01 year but not 02 years	10%
Exceeding 02 years but not 03 years	15%
Exceeding 03 years but not 04 years	25%
Exceeding 04 years but not 05 years	35%
Exceeding 05 years but not 10 years	40%
More than 10 years	05

*Standard T&C apply

What is not Covered Under a Zero Depreciation Add-on Cover?

1. Regular wear and tear, including ageing, rust, and gradual deterioration, is not covered.
2. Mechanical and electrical failures, such as engine malfunctions or wiring issues, are excluded.
3. Damage caused due to driving under the influence, illegal activities, or negligence is not covered.
4. Tire and battery replacements are generally excluded unless they are damaged in an accident.
5. Engine and gearbox damage due to hydrostatic lock, oil leakage, or lack of lubrication is not covered unless you have an engine protection cover.
6. Consequential damages, like engine failure caused by delayed repairs, are not covered.
7. Some insurers limit the number of zero depreciation claims, usually allowing only two per policy year.
8. Minor dents, scratches, and cosmetic repairs that do not impact vehicle functionality may not be covered.

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

Points of Difference	Comprehensive Car Insurance Policy	Comprehensive Car Insurance Policy with Zero Depreciation Cover
Coverage	Covers loss or damage due to natural calamities, unplanned activities, personal accident cover, and third-party legal liability.	Includes all comprehensive coverages plus repair/replacement of damaged car parts due to collision without considering depreciation.
Premium	Slightly lower compared to a policy with zero dep cover.	Higher premium as it includes an add-on cover.
Number of Claims	Multiple claims can be made up to the Insured Declared Value (IDV) of the car.	Maximum of 2 claims per policy year.
Out-of-pocket Expenses	Higher, as the policyholder bears mandatory deductions and depreciation costs.	Significantly reduced, as the insurer covers the depreciation cost.
Age of the Car	Can be purchased for both new and old cars.	Available only for newer cars up to 5 years of age.

Important Things to Remember Zero Depreciation in Car Insurance

1. Covers Full Claim Amount: Unlike standard policies, zero depreciation insurance does not deduct depreciation on replaced parts during a claim.
2. Higher Premium: Zero dep cover comes at a higher cost than regular comprehensive insurance due to its added benefits.
3. Limited Age for Eligibility: Most insurers offer zero depreciation cover for cars that are less than 5 years old.
4. Limited Number of Claims: Some policies restrict the number of claims under zero depreciation coverage, often 2 per year.
5. Exclusions Apply: Certain components like tires, batteries, and engine damage due to oil leakage may not be covered under zero dep insurance.
6. Best for New & Luxury Cars: Ideal for new, high-end, and expensive vehicles, ensuring you get the maximum claim amount.
7. Requires Comprehensive Policy: Zero depreciation cover can only be added to a comprehensive insurance policy, not to third-party insurance.
8. Check Insurer’s Terms: Different insurers have varying terms on car age, claim limits, and parts covered, so always review the policy details before purchasing.

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

Your car insurance prices depends on the following factors:

1. IDV (Insured’s Declared Value) of the car
2. NCB (No Claim Bonus), if applicable
3. Liability premium of your car, which can vary every year
4. Cubic capacity (cc) of the vehicle
5. Geographical zone
6. Add-on covers (Optional)
7. Accessories that you have used in your car (Optional)

Also Read: What is the Benefit Of Zero Depreciation Car Insurance?

Who Should Opt for a Zero Depreciation Cover?

1. Owners of New Cars: Ideal for those with a new or recently purchased vehicle to ensure maximum claim benefits.
2. Luxury and Expensive Car Owners: Recommended for high-end or premium cars, where repair costs are significantly higher.
3. Frequent Drivers: Suitable for individuals who drive regularly, as they have a higher risk of minor accidents or damages.
4. Residents of High-Traffic Areas: Beneficial for those living in cities or accident-prone areas where minor collisions are common.
5. Inexperienced or New Drivers: Helps new drivers manage repair costs in case of accidental damage.
6. People Looking for Higher Claim Benefits: Ensures that depreciation costs are not deducted from claim settlements, leading to better financial coverage.
7. Those Who Want to Avoid Out-of-Pocket Expenses: Reduces personal expenses on replacements and repairs after an accident.

Conclusion

The key role of zero depreciation cover during claims is to save money that otherwise you would end up paying. So, if you plan to buy car insurance online, consider choosing a zero depreciation cover and adding it to the base plan. Choosing the right add-ons for your vehicle is extremely important. And if you already have an existing car insurance policy and the car is less than 05 years old, even then opt for a zero depreciation car insurance cover. Steps like these help you save money while making insurance claims.

FAQs

Should I buy zero depreciation car insurance?

Zero depreciation car insurance is ideal for new, luxury, and high-end cars as it covers the full claim amount without considering depreciation. It is beneficial if you want maximum financial protection against repair costs.

Is it good to take zero depreciation car insurance after 5 years?

Most insurers offer zero depreciation cover for cars up to 5 years old. Some insurers extend it beyond that, but the premium increases. Check with your insurer if your car qualifies for this add-on.

Is zero depreciation the same as bumper-to-bumper?

Yes, zero depreciation and bumper-to-bumper insurance are the same. This add-on ensures that the insurer covers the full cost of replacing damaged parts without depreciation deductions.

Is zero depreciation add-on different from comprehensive cover?

Yes, a comprehensive policy covers third-party and own damage, but it includes depreciation deductions during claims. Zero depreciation is an add-on that removes these deductions, offering a higher claim amount.

Is the engine covered in zero depreciation add-on cover?

No, zero depreciation does not cover engine damage due to waterlogging or oil leakage. For engine protection, you need a separate "engine protection cover" add-on.

Which is better, comprehensive car insurance or zero dep add-on?

A comprehensive policy covers basic damages and third-party liability, while a zero depreciation add-on provides full claim benefits without depreciation deductions. If you want higher claim amounts, opting for zero depreciation is better.

Is zero depreciation same as bumper to bumper?

Yes, both terms refer to the same add-on that eliminates depreciation deductions, ensuring a full claim amount for replaced parts during repairs.

Does IDV reduce in zero depreciation?

No, zero depreciation does not impact the Insured Declared Value (IDV). IDV is based on the car’s age and market value, while zero depreciation affects how much is deducted for depreciation during claims. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.