Zero Depreciation Add-On For Car Insurance

Zero Depreciation Add-On For Car Insurance

Imagine that you're considering upgrading your smartphone to the latest model. Before you can make the switch, you decide to sell your current one, which you bought for a hefty sum two years ago. Yet, to your dismay, its resale value has plummeted since then. What exactly causes this? Well, as time passes, newer models emerge, and the technology in your phone becomes outdated, leading to a significant depreciation in its value.

Similar to smartphones or any electronics for that matter, the ageing process chips away at the value of vehicles too. This phenomenon, known as depreciation, affects insurance claims. When you file a claim, the insurer factors in this depreciation, reducing your claim payout.

This depreciation clause could leave you digging deeper into your pockets during a claim scenario. However, there's a solution at hand. You can opt for a zero depreciation add-on to your car insurance policy for a slight additional cost. It’s important to consider it when you buy insurance. With this add-on, depreciation is not factored into your claim settlement. Let's delve into its mechanics and the advantages it offers.

What is Zero Depreciation in Car Insurance?

Zero depreciation, also referred to as nil depreciation or bumper to bumper cover, is an optional add-on in car insurance that eliminates the depreciation factor from the policy coverage equation.

Typically, as a vehicle ages, it experiences depreciation, meaning its value decreases over time. When you file a claim under a standard insurance policy, the insurance company takes into account the depreciation of the car's parts. They subtract this depreciation from the Insured Declared Value (IDV) of the vehicle before settling the claim.

With the zero depreciation add-on, depreciation is disregarded during claim settlement. This means all parts of your car are covered at 100% of their value, except for tyres, tubes, and batteries, which are usually covered at 50%. Additionally, some insurers may limit the number of claims you can make under this add-on (mostly two times), while others offer unlimited claims during the policy period.

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Should You Opt For Zero Depreciation Car Insurance Cover?

Considering whether to opt for zero depreciation car insurance cover depends on various factors. Here are the scenarios where it might be beneficial -

  • New Vehicle Purchase: If you've recently bought a new vehicle, opting for zero depreciation cover can help ensure that you receive full compensation for any damages.
  • Expensive Or Luxury Vehicle Ownership: Owners of expensive or luxury vehicles often choose zero depreciation cover to protect their significant investment.
  • Residence In Accident-Prone Areas: If you live in a city or area known for frequent accidents or high traffic congestion, opting for zero depreciation cover can provide peace of mind.
  • Vehicle With Expensive Spare Parts: If your vehicle has costly spare parts or features advanced technology, opting for zero depreciation cover can be advantageous.

Is Zero Depreciation Insurance Beneficial for Cars?

If you're on the fence about whether to add zero depreciation insurance to your car policy, let's break down why it might be a game-changer:

1️⃣Boosts Coverage: Think of zero depreciation insurance as the turbocharger for your base plan. It kicks things up a notch by expanding your coverage, ensuring that your car is shielded from depreciation-related losses.

2️⃣Saves You Cash In The Long Run: Picture this – you're faced with hefty repair bills after an unexpected mishap. But with zero depreciation insurance, you're in luck. Your repair costs are calculated without factoring in the dreaded depreciation, meaning more money stays in your pocket over time.

3️⃣Maximises Claim Payouts: Here's where it gets really exciting – when you opt for zero depreciation cover, you're in line for a bigger slice of the pie when it comes to claim settlements. Compared to standard policies, which deduct depreciation from your claim amount, this add-on ensures you walk away with a higher payout.

4️⃣Cuts Out-of-Pocket Expenses: Let's face it – unexpected expenses can throw a wrench in your budgeting plans. But with zero depreciation insurance, you can bid farewell to those pesky out-of-pocket costs. Since depreciation isn't factored into your claim calculations, you'll have more cash on hand when you need it most.

Now that we understand the importance of this cover, let us look at how it works.

How Does Zero Depreciation In Car Insurance Work?

Let's break down how zero depreciation works with an example -

Meet Maya, an enthusiastic driver who takes great pride in her sleek, well-maintained car. Maya's vehicle is covered by a comprehensive motor insurance policy with an IDV (Insured Declared Value) of Rs 5 lakhs. One unfortunate day, while navigating through heavy traffic, Maya's car ends up with significant damage after colliding with a roadside barrier. The impact results in damage damaging the bumper, hood, and tail lights, with repair estimates totaling Rs 30,000 – Rs 20,000 for the bumper, Rs 10,000 for the hood and tail lights.

Now, let's see how the claim payout varies with and without the zero depreciation add-on -

Bumper (made of fibre): Depreciation at 30% of Rs 20,000 = Rs 6,000

Hood and Tail Lights (made of plastic): Depreciation at 50% of Rs 10,000 = Rs 5,000

Claim Payable = Total Repair Cost - Depreciation for Bumper - Depreciation for Hood and Tail Lights

= Rs 30,000 - Rs 6,000 - Rs 5,000

= Rs 19,000

So, without the zero depreciation add-on, Maya would have to shell out Rs 11,000 from her own pocket to cover the remaining repair costs. But, with the zero depreciation add-on, she need not pay any depreciation amount from her end.

After understanding the mechanics of zero depreciation, we would like to add that every cover in insurance comes with a set of inclusions and exclusions that become a deciding factor for claim rejection or acceptance by the insurers. Having a clear idea about them helps you make the right decisions. Take a closer look at them in the section below.

Inclusions And  Exclusions

Inclusions in this cover are -

  • Damage Due To Natural And Man-Made Disasters: If your car sustains damage from events such as a landslide, earthquake, flood, terrorist attack, riots, or vandalism, the zero depreciation add-on will cover the repair or replacement costs.
  • Accidental Damage: Whether it's a minor fender bender or a major collision, if your car is damaged in an accident, the zero depreciation add-on ensures you're covered for repairs.
  • Damage During Transit: If your car is being transported from one location to another and suffers damage in transit, the zero depreciation policy steps in to cover the repair expenses.

Exclusions in this cover are -

  • Driving Without A Licence: The zero depreciation add-on will not apply if you're driving without a valid licence at the time of the incident.
  • Driving Under The Influence: If you're found to be driving under the influence of drugs or alcohol when the damage occurs, the zero depreciation coverage will not be applicable.
  • Normal Wear And Tear Or Mechanical Breakdown: Expenses related to regular wear and tear or mechanical breakdown of your car are not covered under the zero depreciation policy.
  • Problems With Engine Oil, Coolant, Clutch Oil, etc.: Issues arising from problems with engine oil, coolant, clutch oil, and similar components are excluded from zero depreciation coverage.
  • Total Loss To Your Car: If your car is declared a total loss, where the cost of repairs equals or exceeds its insured value, zero depreciation coverage does not apply.
  • Excessive Claims: The zero depreciation add-on may have limitations on the number of claims you can make within a specified period. If you exceed this limit, the coverage may not apply to subsequent claims within that period.

Zero Depreciation Car Insurance vs Comprehensive Coverage

We can now look at the differences between buying a comprehensive motor insurance policy with zero depreciation cover and buying it without zero depreciation cover. This table given below might help you understand in detail.


Comprehensive Policy With Zero Depreciation Cover

Comprehensive Policy Without Zero Depreciation Cover


Depreciation not considered at claim settlement.

Depreciation considered at claim settlement.


Slightly higher.


Claim Settlement

Higher claim amount.

Lower Claim Amount.


Vehicles up to 5 years old.

Vehicles of all ages.

Number Of Claims

Restrictions may apply.

Unlimited claims allowed.


How is Zero Depreciation Car Insurance Premium Calculated?

The premium for zero depreciation car insurance is determined by several key factors, each influencing the cost of the add-on. Here's a breakdown of the critical factors affecting the premium calculation:

  1. Age Of Your Vehicle: The age of your vehicle plays a significant role in determining the premium for the zero depreciation add-on. Generally, the premium for new vehicles will be slightly higher compared to older vehicles. This is because newer vehicles typically have higher repair or replacement costs for parts, making them riskier to insure.
  2. Location Of The Vehicle: Your vehicle's location also impacts the premium for the zero depreciation add-on. Insurance companies consider the geographical location where your vehicle is primarily driven. If your vehicle operates in an area with a high frequency of accidents or incidents, such as accident-prone cities or localities, the premium may be higher. This is because the likelihood of filing a claim is higher in such areas, leading to increased risk for the insurer.
  3. Make And Model Of Your Vehicle: The make and model of your vehicle are crucial factors in determining the premium for the zero depreciation policy. Different vehicles have varying features, technology, and repair costs associated with them. As a result, the premium for the add-on will differ based on the make and model of your vehicle. Vehicles with more advanced features or luxury models may have higher premiums due to their higher repair or replacement costs.

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Depreciation Rates in Car Insurance

Here's a table summarising the rate of depreciation based on the vehicle's age -

Vehicle’s Age

Rate of Depreciation

Less than 6 Months


6 Months to 1 Year


1 Year to 2 Years       


2 Years to 3 Years


3 Years to 4 Years


4 Years to 5 Years


5 Years to 10 Years


More than 10 Years


How to Buy Zero Depreciation Car Insurance?

Here's a step-by-step guide on how to buy and renew zero depreciation car insurance online:

How To Buy Zero Depreciation Car Insurance -

  • Visit the website of the insurance company, web aggregator, or broker.
  • Enter the details of your vehicle, such as make and model, registration number, fuel type, etc.
  • Once the details are filled, you'll be directed to the quote page displaying coverage options and premium details.
  • From the drop-down list of "add-ons" options, select zero depreciation to add it to your coverage.
  • The premium will be updated to reflect the addition of the zero depreciation add-on.
  • Review all the details thoroughly and proceed to make the payment.
  • Once the payment is completed, you'll receive the policy document.

How To Renew Zero Depreciation Car Insurance Online -

  • Visit the website of any insurer or broker.
  • Enter your vehicle number for identification.
  • Select the Comprehensive Plan with zero depreciation cover from the available plans.
  • Proceed to pay the premium online to instantly renew the zero depreciation cover.

By following these steps, you can easily purchase or renew zero depreciation car insurance online, ensuring comprehensive coverage for your vehicle without the hassle of paperwork or visiting a physical location. Now let’s look at the claim settlement aspect in zero depreciation.


Claim Settlement With Zero Depreciation Car Insurance

During the traditional claim settlement process, insurers typically deduct the applicable depreciation on car parts as outlined in the policy wording. This depreciation rate varies based on factors such as the age of the vehicle and the type of part being replaced.

However, when you file a claim against a zero depreciation car insurance policy, you're in for a pleasant surprise. With zero depreciation cover, you'll receive the full claim amount without any deductions due to depreciation. This means you won't have to dip into your own pocket to cover the depreciated value of car parts during repairs.

Moreover, the claim process becomes remarkably straightforward with zero depreciation cover. Since there are no worries about deductions related to depreciation rates, you can rest assured that your claim settlement will be hassle-free and efficient. With zero depreciation cover, it's all about getting the full value for your vehicle's repairs, ensuring peace of mind and financial security when you need it most.


Why Buy From SMC Insurance Brokers Private Limited?

Finding the right insurance partner can make all the difference when it comes to securing the coverage you need. SMC emerges as a top choice for purchasing insurance policies tailored to your requirements. Here's why you should consider us -

  • We've Got Your Back: At SMC, we're all about you. Unlike other places, we're not working for big insurance companies – we're working for you! Our job is to find the best plans for you, plain and simple.
  • No Spam, Just Peace: Your time matters, and so does your privacy. We promise not to bug you with unnecessary calls or emails. We'll only reach out when you ask us to or when it's really important.
  • Help When You Need It: Insurance can be confusing, especially when it's time to make a claim. But don't worry – we've got your back there too! Our team is here to help you every step of the way.

With SMC as your insurance ally, expect personalised guidance, minimal disruptions, and unwavering support when you need it most. Your insurance journey should be stress-free, and with us, it's exactly that.

When Is A Zero Depreciation Claim Declared Null And Void?

Your zero depreciation claim can be declared null and void under the following circumstances -

  • If you're caught driving without a valid driver's licence.
  • If your car is stolen, and you've lost both sets of keys.
  • If you're driving under the influence of drugs or alcohol.
  • If you fail to file a First Information Report (FIR) after your car is stolen.


What is The Cost of Zero Depreciation Cover? Why is It Worth The Price?

The cost of zero depreciation cover typically amounts to around 15% of the insurance premium. While this may initially seem like a substantial expense for an add-on cover, it's well worth the price. Here's why:

  • Despite the upfront cost, the compensation amount provided by zero depreciation cover is significantly higher than the premium paid.
  • By eliminating depreciation deductions, zero depreciation cover ensures you receive full compensation for repairs or replacements, saving you money in the long run.
  • Utilising a zero depreciation insurance calculator can help you estimate the cost of zero depreciation cover, making it easier to budget for this valuable protection.

Summing Up!

In a world where the value of possessions diminishes over time, the zero depreciation add-on for car insurance offers financial security and peace of mind. Like a safeguard against the erosion of value, this add-on ensures that your investment in your vehicle remains protected, irrespective of the passage of time or the wear and tear it undergoes. While its cost may appear as an additional burden initially, the comprehensive coverage it provides and the assurance of full compensation for damages render it a worthy investment in the long run. With the zero depreciation add-on, the narrative of insurance transcends beyond mere protection; it becomes a symbol of promise, ensuring that the value you place in your vehicle remains intact, regardless of the challenges it may face.


  1. What is zero depreciation in car insurance?
    Zero depreciation, or zero dep, is a nifty add-on in car insurance that exempts you from paying for depreciation during claim settlements. In simpler terms, it means you won't have to shell out any extra cash to cover the depreciated value of your car parts when filing a claim.
  2. Is zero depreciation required?
    Deciding whether to opt for Zero Dep car insurance depends on your unique needs and the nature of your vehicle. For instance, if you're a proud owner of a luxury ride or have recently splurged on a brand-new car, snagging a Nil Depreciation cover might be a smart move.
  3. Is it worth it to take zero depreciation?
    Absolutely! Zero depreciation car insurance may seem pricier upfront, but it's a game-changer in the long run. By sparing you from depreciation deductions, it ensures you receive higher payouts during claims, saving you from draining your savings on part replacements.
  4. Can I get zero depreciation available after 5 years?
    While most insurers limit zero depreciation coverage to vehicles under 5 years old, some providers extend this perk to older vehicles. It's worth checking with your insurer to explore such coverage options and their associated terms.
  5. Does zero depreciation cover tires?
    Unfortunately, zero depreciation cover doesn't extend to wear and tear items like tyres or damage caused by engine malfunctions. However, it does shield you from the depreciated value of other car parts during claims.
  6. Why should I buy zero depreciation car insurance?
    Zero depreciation insurance ensures that you can claim the entire replacement cost of damaged car parts without any deductions for depreciation. It's a lifesaver when it comes to saving you a significant chunk of money during unexpected accidents.
  7. Do I get a No Claim Bonus with zero-depreciation insurance?
    Yes, you're still eligible for a No Claim Bonus (NCB) even with zero depreciation car insurance. By not filing any claims during your policy period, you can accumulate NCB discounts, up to a whopping 50% off your premiums.
  8. What is Insured Declared Value (IDV) in nil depreciation policies?
    Think of IDV as the market value of your car – it's the maximum sum insured by your car insurance provider in case of theft or irreparable damage.
  9. Till when can I buy zero depreciation insurance for my car?
    Zero depreciation cover is typically available for cars less than five years old. However, some insurers may extend this perk for slightly older cars, up to seven years in some cases. The availability depends on your insurer and your car's specifics.
  10. How to know if my car insurance is zero depreciation?
    Simply flip through your policy document and keep an eye out for terms like "zero depreciation," "nil depreciation," or "bumper-to-bumper" coverage. If you spot any of these, congratulations – you're covered with zero depreciation!
  11. Can third-party insurance be converted to zero depreciation?
    Sorry, but you can't convert a third-party car insurance policy into Zero Dep car insurance. This cover is exclusively available as an add-on to comprehensive car insurance policies.
  12. Who is eligible for zero depreciation insurance?
    Any car less than five years old is eligible for this coverage. It's available as an add-on to both standalone own damage and comprehensive car insurance policies.
  13. Is zero depreciation the same as bumper-to-bumper?
    Yes, indeed! Zero depreciation and bumper-to-bumper coverage are just different names for the same feature. They both ensure comprehensive coverage without depreciation deductions.

  14. How much will zero depreciation add-on cost?
    The cost of a zero depreciation policy varies, but you can expect to pay around 15-20% extra on top of your standard insurance premium. It's a small price to pay for big-time peace of mind!
  15. Is nil depreciation cover transferable to another owner?
    Absolutely! You can seamlessly transfer your zero depreciation cover to the new owner of the car. Just make sure to keep the car's registration number unchanged for the transfer to go smoothly.
  16. How is zero depreciation car insurance premium determined?
    Insurers factor in various elements like your car's location, age, make, and model to calculate the premium for zero depreciation cover. It's all about assessing the risk and ensuring you get the coverage you need at a fair price.


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