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What Does Depreciation Reimbursement Mean in Car Insurance?
Nikhila PSMay 27, 2026
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Depreciation reimbursement in car insurance, or commonly known as bumper-to-bumper insurance, is an optional coverage. With this cover, you are assured that when an insured part of your car is damaged, the insurer compensates for the replacement cost without deducting the value for ageing, wear or tear. Opting for this add-on can be highly beneficial, as depreciation forms a significant portion of car insurance claims. As a result, it helps reduce the policyholder’s out-of-pocket expenses at the time of claim settlement.
Contents
How Does Depreciation Reimbursement Work in Car Insurance?
Depreciation reimbursement cover, also known as zero depreciation cover, is an add-on feature in car insurance that reduces the depreciation deduction applied during claim settlement. Let us find out how it works:
Applicable to plastic, rubber, fibre, nylon, and in some cases, metal parts, depending on policy terms.
Helps the policyholder receive a higher claim amount by covering depreciation deducted on replaced parts, excluding only the mandatory deductibles.
Available as an add-on to a comprehensive car insurance policy.
Minimises out-of-pocket expenses for car repairs after an accident.
Available for vehicles for a certain period, generally up to 5 years.
For instance, Jane's car was damaged in an accident, and the repair costs were ₹45,000. The claim was approved, and depreciation of ₹12,000 on rubber and plastic parts was deducted. Since Jane had opted for depreciation reimbursement cover, the insurer also paid out the deducted amount. For this, Jane had to pay only the compulsory deductible.
Depreciation Rates in Standard Car Insurance
Now, what is the depreciation rate for a standard car insurance policy? Well, in standard insurance plans, insurers apply a fixed depreciation rate to different parts of the vehicle, as specified by the Insurance Regulatory and Development Authority of India (IRDAI).
The table below highlights the depreciation rates in detail:
Alongside this, different car parts follow a specific depreciation rate:
What are the Benefits of Depreciation Reimbursement in Car Insurance?
Here are some benefits of depreciation reimbursement in car insurance in India:
1. High Claim Amount
A high claim amount is a significant benefit of depreciation reimbursement in car insurance. In a standard plan, insurers deduct depreciation costs on plastic, rubber, and fibre during claim settlement. However, with depreciation reimbursement cover, these deductions are waived.
In line with IRDAI guidelines, the zero-depreciation cover applies to the replacement or repair of affected parts without depreciation.
2. Reduced Out-of-Pocket Expenses
Car insurance depreciation reimbursement helps minimise out-of-pocket expenses during vehicle repairs. This add-on enables the insurer to cover the depreciation deducted on replaced parts, making repair expenses more manageable for the policyholder.
In the event of an accident, repair and replacement costs can be high. By opting for depreciation reimbursement cover, you can reduce your financial burden and receive better claim support during repairs.
3. Easy and Affordable Add-ons
A further benefit of depreciation reimbursement car insurance is that it is an easy add-on under a comprehensive car insurance plan. This add-on is typically much less than the repair expenses.
Several insurers in India offer zero-depreciation coverage for vehicles up to 5 years old, and some even offer coverage for older vehicles.
4. Comprehensive Protection
What is depreciation reimbursement if there is no extra layer of financial protection? This add-on improves coverage of your existing comprehensive plan. Also, ensure you do not reduce your claim amount after the damage.
Choosing this cover is beneficial for luxury cars and cars in high-traffic areas. Also provides a sense of peace of mind and enhanced financial security.
What are the Key Exclusions Under Depreciation Reimbursement Cover?
The key exclusions under the depreciation reimbursement ad-on cover are:
1. Mechanical breakdown or other technical and mechanical failure
2. Normal wear and tear of your car
3. Damages caused due to intentional acts, negligence, or non-accidental reasons
4. Older cars (typically five years and more), as mentioned by your insurer
5. Consumables such as fuel, lubricants, nuts, bolts, and grease (unless covered under a separate consumables add-on)
Final Thoughts
Understanding what is depreciation reimbursement in car insurance enables car owners to make better decisions. This add-on results in reduced out-of-pocket costs and a higher claim amount after repair. Also, offers additional financial protection for replaced car parts. The depreciation reimbursement car insurance in India is particularly useful for new car owners who frequently drive on busy roads.
Looking for comprehensive car insurance with useful add-ons at an affordable cost? Choose ACKO car insurance and avail comprehensive coverage benefits with add-ons such as depreciation reimbursement cover. Review the available plans and safeguard your car with enhanced financial security.
Frequently Asked Questions
Mostly Asked Questions on depreciation reimbursement and zero depreciation
How is a Car Insurance Policy with Zero Depreciation Different from a Standard One?
With a zero depreciation car insurance policy, you can avail better claim settlement by covering depreciation costs on replaceable car parts after an accident. Whereas, in a standard policy, the policyholder must bear the depreciation amount during the claim settlement process.
Is depreciation reimbursement similar to bumper-to-bumper insurance?
No, a bumper-to-bumper insurance policy covers all components of a car, except for specific exclusions. Some insurers offer zero-depreciation or bumper-to-bumper policies that cover batteries and tyres.
Can I buy zero depreciation cover for cars older than 5 years?
The majority of insurers in India offer zero-depreciation cover for cars older than 5 years. This benefit is also extended to older vehicles after a proper inspection and consideration of their condition. The premium amount and term, however varies between insurance providers.
Which is better: comprehensive or zero depreciation cover?
Opting for comprehensive cover, you can benefit from high-risk coverage, though the policy subtracts the deduction amount. Whereas a zero-depreciation insurance does not include all claim-related expenses, as policyholders must pay for exclusions and deductibles.
Does a depreciation reimbursement cover all parts in a car insurance policy?
Depreciation reimbursement typically covers parts such as tyres, plastic, batteries, and metal components. Whereas, parts subject to normal wear and tear or to breakdown and failure are usually not included in the add-on.
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