Zero Depreciation Car Insurance – Nil Depreciation: Benefits, Coverage & Features

The value of your car depreciates as it ages, and this affects claim settlements. This is because your car loses its value over time due to regular wear and tear as well as the ageing of the car. In case your car meets with an unfortunate accident, you may not be able to recover the total cost of parts which have been replaced. This is because insurers pay the repair bill after deducting the depreciation amount of the car parts. Which means you need to pay the remaining portion of the repair bill. This is where Zero Depreciation Car Insurance or Nil Depreciation cover comes to your rescue. This is an add-on cover which does not consider the depreciation of the car parts and gets you more compensation in terms of money during claims.

Zero Depreciation or Nil Depreciation in Car Insurance

Contents

What Is Zero Depreciation?

A Comprehensive Motor Insurance along with Zero Depreciation cover, which is an Add-on cover, pays for the damages to your car without considering the depreciation factor. Zero Depreciation Add-on Cover for your car is also referred to as Nil Depreciation in Car Insurance or Bumper to Bumper cover, which will cover the entire compensation amount. You can avail this Add-on cover when you buy car insurance for your new car or at the time of car insurance renewal.

The Zero Depreciation Cover provides 100% coverage of all plastic, fibre and metal parts without considering the depreciation of these parts. However, the Add-on cover has its limitation and does not cover the replacement of tyres and tubes or in the event of a total loss of the vehicle.

What is Zero Depreciation or Nil Depreciation in Car Insurance?

The official term for the Add-on cover is referred to as Zero Depreciation in car insurance. It is popularly called or referred to as Nil Depreciation cover or Bumper-to-Bumper cover. They all mean the same and its main objective is to cover the depreciation of the car parts while settling claims. While you need to pay an additional premium to purchase this Add-on, this can eliminate the possibility of paying from your pocket during claim settlements.

How is Depreciation Calculated?

Due to regular wear and tear of the car parts, and the ageing of the car, the value of the car depreciates over a period of time. The Insurance Regulatory and Development Authority of India (IRDAI) has set the depreciation rates for cars. Below are the tables which show how depreciation is calculated:

Rate of Depreciation for all parts:

Below is the rate of depreciation of all car parts approved by the IRDAI:

Car PartsRate of Depreciation
Rubber/Plastic/Nylon/Tyres/Tubes/Batteries50%
Fibre Parts30%
Glass PartsNil

Rate of Depreciation in Vehicles (%):

Below is the rate of depreciation for all parts of the car:

Age of CarRate of Depreciation
Less Than 6 MonthsNil
More Than 6 Months to 1 Year5%
More Than 1 Year to 2 Years10%
More Than 2 Years to 3 Years15%
More Than 3 Years to 4 Years25%
More Than 4 Years to 5 Years35%
More Than 5 Years to 10 Years40%
More Than 10 Years50%

Rate of Depreciation in Vehicles – Metallic Parts (%):

Below is the rate of depreciation for the metallic parts of the car:

Age of CarRate of Depreciation
Less Than 6 MonthsNil
More Than 6 Months to 1 Year5%
More Than 1 Year to 2 Years10%
More Than 2 Years to 3 Years15%
More Than 3 Years to 4 Years25%
More Than 4 Years to 5 Years35%
More Than 5 Years to 10 Years40%
More Than 10 Years50%

Also, read: Calculate Premium with Car Insurance Calculator

Car Insurance With or Without Zero Depreciation:

To better understand car insurance opted along with a Zero Depreciation Add-on cover and insurance without it, below is a table comparing the two scenarios while raising a claim for damages sustained during an accident:

With Zero DepreciationWithout Zero Depreciation
Maximum claim amountClaim amount after considering the depreciation of replacement parts
Age of the car is not consideredAge of the car is considered for calculating the depreciation
Cost of repairing car parts borne by insurance companyCost of repairing car parts (fibre/plastic) borne by the car owner

Example: If your car, worth Rs.10 lakh, meets with an unfortunate accident and you end up with a repair bill of Rs. 50,000. If your car insurance is without the Zero or Nil Depreciation Add-on, the insurance company will pay the repair after deducting the depreciation cost of Rs.10,000.

However, if you have bought the Add-on along with the Comprehensive car insurance, you could have saved Rs.10,000 since the insurer will not consider the depreciation of car parts while settling the claim.

What is Zero Depreciation Cover Add-on or Depreciation Reimbursement Cover or Bumper to Bumper Insurance Cover?

While the name might be different, Zero Depreciation/Depreciation Reimbursement/Bumper to Bumper Cover means the same. They compensate or cover the cost of the depreciation parts while settling car insurance claims. This is an Add-on to the Comprehensive Car Insurance and protects you from paying from your pocket while settling the repair bill.

While this Add-on covers most expenses arising out of damages to your car, it has its limitations as well. Regular wear and tear, mechanical breakdown or engine breakdown are not covered under the Nil Depreciation Add-on. That said, a Comprehensive Car Insurance will take care of your car’s repair costs, but buying the Zero or Nil Depreciation Add-on Cover will give you added advantage and help you bridge the gap between the claim settlement amount and the actual damages to your car. This way you need not worry about unexpected expenses.

Which Factors Affect The Bumper-to-Bumper (Zero Depreciation) Insurance Premium?

When the insurance company sets the premium for the Bumper-to-Bumper car insurance, it will consider the below factors to arrive at the premium that you will have to pay for your car:

  • Location
  • Age of Your Car
  • Model of Your Car

Benefits of Zero Depreciation Car Insurance Add-on:

Apart from offering you peace of mind when it comes to unexpected expenses due to an unfortunate accident, there are several other benefits of a Zero Depreciation Car Insurance Add-on which are listed below:

1. Increases the Payable Claim Amount

Insurance companies consider the depreciation rate of car parts before settling claims for the repair bill. Car parts such as rubber, nylon and plastic have a 50% rate of depreciation. Fibre parts attract 30% while wooden and metallic parts attract between 5% to 50% depending upon the age of your car. Hence, these criteria drastically affect the amount of claim.

For example, if the repair cost for the plastic part of your car is Rs.30,000, then the insurance company will settle your claim for Rs.15,000. However, if you have opted for the Zero Depreciation Add-on, the insurer will settle the claim amount of Rs.30,000 thereby increasing the payable claim amount.

2. Protects Your Hard Earned Money

Since the Zero Depreciation Add-on helps in increasing the payable claim amount, you are certainly controlling the outflow of your hard-earned money. Without the Nil Depreciation Add-on, you end up paying the unpaid portion of the claim. And, if the damage to your car is considerable, the repair bill will certainly be higher and burn a hole in your pocket.

3. The Add-on Comes at an Affordable Cost

While the Zero Dep Car Insurance is offered with an additional premium, the cost is low and affordable. You can compare the Nil Depreciation premium online and then choose the plan with the lowest premium. Additionally, by including the Zero Depreciation Add-on to the Comprehensive Car Insurance, your car and your money are well-protected at an affordable cost.

How is Zero Depreciation Different From a Regular Cover?

The difference between a Zero Depreciation Cover and a regular cover (Comprehensive Insurance) is that the former promises to settle the claim in full. However, the regular or Comprehensive Car Insurance will settle the claim after estimating the depreciation of the car parts or the current market value of your car.

Hence, if your car receives physical damages due to an unfortunate accident, the regular plan will pay the claim amount after deducting the depreciation. However, Comprehensive insurance policy along with the Zero Depreciation Add-on will pay the repair bill without evaluating the current value of the car. The table below explains the differences between the two types of covers for your car:

ParticularsComprehensive Car Insurance With Zero Depreciation CoverComprehensive Car Insurance Without Zero Depreciation Cover
PremiumSlightly higherSlightly lower
Claim Settlement AmountHigherLower
Repair of Plastic PartsNo depreciationDepreciation of 50%
Age of CarDepreciation rate is nil during claimsDepreciation is considered during claims

Why Buy a Zero Depreciation Cover with Car Insurance?

The Zero Depreciation cover is offered as an Add-on to the Comprehensive Car Insurance plan. But how does it add value when you buy car insurance along with this Add-on? Here is an example which offers a clear insight into the benefits of the Zero or Nil Depreciation Cover.

A car worth Rs.6 lakh meets with an unfortunate accident and the cost to repair or replace those parts is Rs.30,000. However, the depreciation of the car parts is Rs.6,400, hence the insurer will pay Rs.23,600 to settle the claim after considering or deducting the depreciation amount. The balance has to be paid by the car owner. Instead, if the car owner had bought the car insurance along with the Zero Depreciation Add-on by paying a slightly higher premium, the owner could have claimed the entire repair bill and saved Rs.6,400.

How To Buy Zero Depreciation Car Insurance?

Buying a Zero Depreciation Car Insurance Policy is a lot easier with the advent of digital technology. You can buy the Add-on cover online while purchasing or renewing the car insurance. Simply select the Zero or Nil Depreciation Add-on when you are processing the Comprehensive Car Insurance Plan. However, you cannot buy this Add-on with the Third-Party Liability policy.

What is Not Covered (Exclusions) in Zero Depreciation Car Insurance?

The Zero Depreciation Add-on is beneficial as it helps avoid the depreciation factor while settling claims. However, it does come with certain limitations. Below are the exclusions on the Zero Depreciation Add-on in Car Insurance cover:

Cars More Than 5 Years Old

The Add-on does not cover cars which are more than 5 years old. Please read the terms and conditions as some insurers do not offer the cover for cars over a certain age.

Replacement of Certain Car Parts

Replacement of tyres and tubes, unless specified in the terms and conditions of the policy, is not covered under the Zero Depreciation cover.

Total Loss/Constructive Total Loss of the Car

In case of an unfortunate accident which renders the car a total loss, the Nil or Zero Depreciation Add-on will not be covered while settling the claim. The current market value of the car is considered while settling claims towards a car which has undergone a total loss.

Found Driving Without a Driving Licence

If you are driving the car without a valid driving licence and you meet with an unfortunate accident, then the insurance company will not honour the claim. In this case, even the Zero Depreciation Add-on will not be considered.

Found Driving Under the Influence of Alcohol/Intoxicating Substances

Your claim towards the repair bill of the damages to your car will be dishonoured if the driver is found driving under the influence of alcohol or intoxicating substance.

Factors To Consider Before Opting For a Zero Depreciation Cover:

The following are important factors to consider before choosing to buy the Zero Depreciation Add-on Cover:

Age of The Car

The Zero Depreciation Car Policy is applicable for cars under 5 years old only. However, some insurers offer the cover for cars above 5 years old. Ensure you check with the insurance company before opting for the Add-on.

Premium Of the Policy

With Zero Depreciation offered as an Add-on to the Comprehensive Car Insurance Policy, the premium is bound to increase. Consider the increase in the premium before choosing the Add-on. However, if you have a luxury car or live in a high-risk area, you should consider adding Zero Depreciation cover to your car insurance policy. This is because the premium for the Add-on is based on the age and model of the car, and the location of the vehicle.

Limit of Claims

You can only raise a limited number of claims during the policy period. Hence, check with the insurance company about the limit of claims before choosing the Add-on.

Compulsory Deductibles

While settling claims, the Add-on covers only the cost of the car part’s depreciation and does not cover compulsory deductibles.

Who Can Opt or When is it Ideal to Opt For a Zero Depreciation Cover?

While the Zero Depreciation Add-on is essential for cars which are less than 5 years old, it is important for the following eligible people:

  • New car owners
  • Luxury/Expensive car owners
  • People living in high-risk areas
  • New drivers
  • Car owners who worry about small dents and bumps
  • Car owners who worry about expensive spare parts

What is the Cost of Zero Depreciation Add-on Cover?

Generally, the Zero Depreciation price or cost is approximately between 15% to 20% depending upon the age, model, location and the insurance company which is offering the Add-on. This cost is over and above the premium, you pay for the car’s Comprehensive Vehicle Insurance. While you may be paying a slightly higher premium, it is ideal when you raise a claim and the insurer settles the bill without deducting the depreciation of car parts.

Also, read: Compare Car Insurance Policies Online

Renewing Zero Depreciation Policies:

You can renew the Zero Depreciation Policy instantly online. Visit the insurance company’s website, enter your car registration and mobile number and complete the renewal process. With the advent of digital technology, the process to renew a car insurance policy is faster and easier.

Zero Depreciation During Car Insurance Claim Settlement:

While settling the claim for the repair bill, the insurance company will pay only the depreciated value of the replaced car parts. However, with the Zero Depreciation Add-on to your Comprehensive car insurance, depreciation does not impact the claim settlement and the insurer settles the entire compensation. The Zero or Nil Depreciation Add-on acts like a shield against deducting depreciation of car parts while settling the claim, especially while replacing expensive car parts. Zero Depreciation plays the role of saving money you would be spending from your pocket.

Difference Between Zero Depreciation (Nil Depreciation) and Comprehensive Car Insurance:

Below are the main differences between Zero Depreciation Cover Vs. Normal Car Cover:

ParticularsZero Depreciation Car InsuranceComprehensive Car Insurance
MeaningAn optional Add-on while buying Comprehensive Car Insurance. This will ensure the insurance company does not deduct depreciation of car parts before settling the claim for the damages to your car.A bundle of Third-party Liability Plan and Own Damage Plan. Several Add-ons can be included to make it exclusive; however, it considers the depreciation of car parts before settling the claim.
PremiumThere is a slight increase in car insurance premiums but ensures there is no depreciation of car parts during claim settlements. The premium for the standalone Comprehensive Policy is lower than a policy which has Add-ons such as Nil or Zero Depreciation.
Age of CarThe Add-on can be purchased for cars which are less than 5 years old.The standalone Comprehensive Car Insurance can be purchased for cars which are less than 15 years old.
Depreciation FactorDepreciation of car parts is not considered while settling claims except for compulsory deductibles.Insurers consider depreciation of car parts while settling claims.
SavingsWhile the premium you pay might be slightly higher, the cost of paying for the depreciation of car parts is nullified.While the premium is lower than that of Zero Depreciation Car Insurance, you get to save only on the premium you pay.

Frequently Asked Questions About Zero Depreciation Car Insurance:

Below are some of the common questions about the Add-on: Zero Depreciation Car Insurance:

Is Nil Depreciation Cover transferable to another owner?

Yes, Nil or Zero Depreciation Cover is transferable to the new owner of the vehicle. Since the insurance policy is on the vehicle and not the owner, the policyholder’s name and the vehicle registration number should be the same.

Can I claim Zero Depreciation again if I have availed it once in the same year?

You can claim up to a maximum of two claims during the policy period.

Is Zero Depreciation Cover available for commercial vehicles?

Please refer to the terms and conditions or policy wordings for Zero or Nil Depreciation Add-on for commercial vehicles as it may differ between insurance companies.

Where is Zero Depreciation mentioned in the policy document?

If you have opted for Zero or Nil Depreciation as an Add-on to your Comprehensive Plan, the policy document will clearly mention the Add-ons that you have opted for.

Can painting and denting work be included in the Zero Depreciation Policy?

The material cost for the paint and the denting work is included in the Zero Depreciation Add-on cover.

Is a Zero Depreciation Cover worth it?

If you own an expensive car, live in an accident-prone area, new car owner, new drivers or worry about dents, a Zero or Nil Depreciation cover is certainly worth buying along with the regular car insurance plan.

How is the Zero or Nil Depreciation Cover different from Standard Comprehensive Cover?

A Zero Depreciation Car Insurance certainly adds value to your car insurance plan since it does not consider depreciation of car parts while settling claims. For more details, you can check the above-mentioned differences.

Can I get Zero or Nil Depreciation car insurance after 3 years?

You can avail the Add-on cover for as long as your car is less than 5 years old. Some insurers may provide the Add-on for vehicles more than 5 years old as well.

Is Zero Depreciation cover applicable only for new cars?

The Zero Depreciation cover is available for cars which are less than 5 years old. Hence, new cars and cars which are less than 5 years old can opt for the Add-on cover.

How many times Zero Dep insurance can be claimed?

Generally, the maximum time you claim Zero Depreciation on your car insurance is twice during the policy year. However, this can be different between insurance companies.

Is tyre covered under Zero Depreciation insurance?

No. The replacement of tyres is not covered under the Zero or Nil Depreciation Cover.

Under which depreciation method, assets of the car can be depreciated until the net scrap value is zero?

When the value of the assets or parts of the car has no market value, its net scrap value is considered zero.

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