Home Discover Journals What is Zero Depreciation Car Insurance

What is Zero Depreciation Car Insurance

By Finserv MARKETS - Feb 4,2019
Views Icon1.82 K Views 1 0 Comments

(1 page reviews)

All About Zero Dep Car Insurance

If you are buying car insurance in India for the first time, you may be baffled by the various types of insurance coverages available in the market.

Besides the necessary car insurance policies like third party liability and comprehensive car insurance, you can opt for several top up covers or riders that can help you cover a wide variety of risks. Some of the top up covers include –

  • No Claim Bonus (NCB) Protection
  • Loss of Personal Belongings
  • Quick Road Assistance
  • Return to Invoice
  • Key Replacement

The zero depreciation car insurance cover is one of the most sought after motor insurance add-on covers. For a little extra premium, it offers complete coverage without the deduction of depreciation. In simple terms, if your car gets damaged following an accident, you will receive the cost of the vehicle at the time of claim settlement.

However, in this article, we will be discussing in detail what zero depreciation car insurance is and how it is different from a basic car insurance plan. But first, let us understand what depreciation is.

What is Depreciation?

Depreciation is nothing but a decrease in the value of assets over the course of time. For instance, a new car model will be priced at a higher rate than its older versions. Likewise, the depreciation factors are associated with all the materials like glass, plastic, the metal body of the car, etc. and each of these materials will have a different rate of depreciation.

Percentage of Depreciation in Cars

Age of Vehicle % of Depreciation
6 months or below 5%
Between 6 months and 1 year 15%
Between 1 year and 2 years 20%
Between 2 years and 3 years 30%
Between 3 years and 4 years 40%
Between 4 years and 5 years 50%

What Is Zero Depreciation Car Insurance?

As the name suggests, this add-on coverage does not factor in depreciation from the coverage, thus providing you with complete protection. So, in case your car is damaged in an accident, your insurer will compensate you for the full amount without considering the depreciation factor. In simple terms, a zero depreciation car insurance offers complete coverage on all parts (excluding the tyres and batteries) of your vehicle.

How Depreciation Affects Car Insurance Claims?

Depreciation is the loss of value of an asset due to factors such as age, wear, and tear, and obsolescence. As cars are depreciating assets, they tend to lose their value over time. For example, a new car will cost more than an older one only because the cost of depreciation is deducted from the total value of the vehicle.

A standard car insurance policy only provides coverage for the insured declared value(IDV) of your car. The IDV is mainly derived after subtracting depreciation from the total value of your car.

The IDV of your car will eventually decrease with time, thereby reducing the total amount you can claim from your policy/company. Therefore, a standard car insurance policy only covers the depreciated cost of the car. The remaining difference will need to be borne by you (the policyholder).

However, when you opt for zero depreciation car insurance, you can get maximum reimbursement during the time of claim settlement as, in this case, the depreciation is not taken into consideration.

If your car is damaged in an accident even after a few years post purchasing a zero dep cover, you will receive a claim amount close to the original cost of your car. Hence, by taking it, you get maximum reimbursement at the time of the claim.

How Is Depreciation Calculated?

Consider the following table to understand the rate of depreciation-

Age Of The Car Rate Of Depreciation
6 months – 1 year 5%
1 year – 2 years 10%
2 years – 3 years 15%
3 years – 4 years 25%
4 years – 5 years 35%
5 years – 10 years 40%
More than 10 years 50%

Zero Depreciation Cover vs. Regular Car Insurance Plan

The difference between zero depreciation cover and regular car insurance is as follows-

Claim Settlement You receive full compensation on the claim made The claim amount is based on the current value of the car and the depreciation factor
Premium Rate High Comparatively low
Repairing Expense And Plastic Fiber Your insurer will bear all the expenses You will have to pay it from your pocket
Age Of The Car Generally, only covers new cars It can be taken for vehicles that are more than three years old

Factors to Consider Before Seeking Zero Depreciation Cover

It is worthwhile that you take into consideration the following factors before opting for zero depreciation car insurance –

  • Cost: Car insurance plans that come along with zero depreciation cover will have high premiums. It is because it offers full protection without factoring in depreciation, so the premiums charged are relatively high.
  • Number of Claims: Most insurers limit the number of claims you can make in a single year. Hence, you must check this number before choosing the policy.
  • Available for New Cars: Zero depreciation cover is generally available only for new cars. Practically speaking, it is not a very cost-effective option to choose this coverage if your car is five years old or more.

Benefits of a Zero Depreciation Car Insurance

  • It helps reduce out-of-pocket expenses since depreciation cost is not considered while filing a claim settlement.
  • Most of the claims regarding insured parts are settled without deducting the depreciation amount.
  • A Zero Depreciation Car Cover adds more value to the basic coverage and makes your investment worthwhile.

If you want to save yourself from depreciation costs in the future, you can opt for the Depreciation Shield top up cover by Finserv MARKETS and get the maximum benefit out of your car insurance policy.

Who Should Buy A  Zero Depreciation Cover?

A Zero Depreciation cover is best for:-

  • New car owners
  • Luxury car owners
  • New / Inexperienced drivers
  • People living in accident-prone areas
  • Cars with expensive spare parts

Now that you know more about add-on covers and especially, the Zero Depreciation cover, log on to Finserv MARKETS and buy or renew car insurance online today!

Another popular add on cover that you must read about is roadside assistance car insurance cover.

What Is Not Covered In Zero Depreciation Add-on?

Things that are not covered under the zero depreciation add-on are as follows –

  • You cannot benefit from the zero depreciation cover if you do not have a valid driving licence
  • For cars that are more than five years old, owners cannot opt for the zero depreciation add-on
  • You can avail the zero depreciation cover benefit if you are caught driving under the influence of intoxicants
  • Any compulsory deductibles mentioned in your basic car insurance plan are not covered under the zero depreciation add-on
  • Zero depreciation cover does not come in handy if your car experiences a breakdown or in case of normal wear and tear of your vehicle
  • This add-on does not provide coverage for expenses related to engine oil, clutch oil, coolant, etc.


Q: Is zero depreciation cover available for five-year-old cars and later?

A: No. Zero depreciation coverage is only available for cars that are less than five years old.

Q: Can I only buy zero depreciation coverage without a comprehensive car plan?

A: No. Zero depreciation add-on coverage is bought only on your existing comprehensive car insurance plan.

Q: What other add-on covers can I choose for my car?

A: Other add-ons that you should consider buying for your car are as follow –

  • No Claim Bonus (NCB) Protection
  • Loss of Personal Belongings
  • Quick Road Assistance
  • Return to Invoice
  • Key Replacement

Q: Is it necessary to buy add-on covers over your basic car insurance?

A: Add-on covers provide extensive coverage to your vehicle that your comprehensive car insurance plan might not be covering. Hence, it is highly advisable to buy only those add-ons that you think might come in handy.


Connect with Us
Connect with Us

Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522