Zero Depreciation Car Insurance

Posted in: Insurance | on: September 4, 2020


What is Depreciation?

​Depreciation is the loss in value of an asset with regard to the factors like mileage, reliability, age, wear and tear, number of owners, service history, oldness etc. Every material or part of the car has a various depreciation rate. If your car is damaged or met with an accident, in most cases, the insurance​ companies will offer the balance amount after subtracting the depreciation amount.

What is Zero Depreciation?

As in general insurance coverage, amount of depreciation is deducted, one can go to the zero or nil depreciation coverage with benefits. A zero depreciation car insurance is a complete car insurance policy with the zero depreciation coverage. There will not be any general depreciation during car insurance claims. One can avail maximum reimbursement with more gain at the claim period.

What is covered under the Zero Depreciation Car Insurance Policy?

A Zero depreciation cover will protect one's car from all kinds of physical damages without considering the depreciation. A car insurance​ with zero depreciation cover can gain you the complete compensation amount. This add on cover is suitable for the brand new vehicles, costly cars and most valuable cars.

However, the insurers have to pay slightly more amount in Zero depreciation cover than the standard policy in terms of their premium. But with the help of this policy, one can avoid the out-of-pocket expenses.

What is not covered under the Zero Depreciation Car insurance Policy?

This policy is not applicable for the drivers without any valid Driving License.

Zero depreciation policy is not suitable for the car owners, whose car is more than five years old.

Drivers who are under the addiction of drug usage are not allowed to get this policy benefits during claims.

This policy does not include Compulsory Deductibles, Mechanical Breakdown/ normal wear and tear of your car. It does not cover the costs of engine oil, clutch oil, coolant, etc.

Benefits of zero Depreciation Coverage:

This insurance policy has more benefits than the standard insurance policy. Some of the benefits are listed as follows:

Avoids Financial Loss:

It will avoid financial loss and compensates the full amount for repair or replacement cost for the car. It will provide you an extra 15% over the comprehensive car insurance premium.

Saves Money:

Zero Depreciation Add on cover may decrease the extra amount which may one spent on taking care of parts of your car, since with this kind of policy, the insurance company is responsible for the insured parts of the car.

Maximum Claim Amount:

Protecting your car with a zero depreciation will provide you a total claim with zero loss. Therefore, one can receive a higher amount without any deduction on depreciation cost during claim settlement.

Factors affecting the Zero depreciation coverage:

The zero depreciation coverage depends mostly on the 3 basic factors namely, Age of the car, model of the car and the location.

Age of the car:

As the zero depreciation mainly depends on the age of your car and its parts, determining the premium for your zero depreciation cover. It is suitable for cars within the age of 3 to 5 years only.

Model of the car:

This car insurance will have a lot impact on the model and type of your car. The premium and coverage will differ depending on the model and kind of your car.

Location of the car:

Location, in which one drives a car plays an important role on the coverage. Since, some cities have high traffic and damaged roads, there is lot of chances for accidents, so the premium will differ in this case.

Who can buy zero Insurance policy?:

Zero deduction coverage on cars is more suitable for the luxury car owners, New drivers, inexperienced drivers, drivers who mostly drive in accident-prone areas, cars with expensive parts etc.

What are the difference between the Zero Depreciation Insurance policy and Normal Car Insurance policy?

Claim Amount:

The amount to be settled at the time of claim does not includes any subtraction and one can get the full compensation amount under the zero depreciation cover.


The premiums to be paid for a zero depreciation cover are slightly higher than those for a normal car insurance cover.

Repairing Costs:

The repair cost or replacement charge of fiber, glass, rubber, and plastic parts are provided by the insurance company and the amount may differ according to the type of the car parts.

For the rubber, nylon, plastic parts and batteries of the car, there will be an 50% depreciation amount.

For the fiberglass components of the car, the depreciation deducted is 30%.

For the wooden parts, depreciation deduction will be based on the age of car, i.e; 5% in the first year, 10% in the second year respectively.

Depreciation Amount:

Under this policy, one need not pay any cost of depreciation during their car insurance claims.

Calculation of Zero depreciation insurance premium:

Here are the factors which will affects the zero depreciation premium:

Place of Registration:

The premium amount will vary according to the place of registration. The amount will be higher in the main cities like Delhi, Mumbai, Chennai, Bangalore, Ahmedabad, Kolkata and Pune.

Sum Insured or Insured’s Declared Value (IDV):

The cost of premium will vary according to the Declared value. IDV is the current market value of the insured car.

Engine Type:

The premium cost will vary according to the engine types of the car. The car with higher cubic capacity is higher when compared with the car having an engine with lower cubic capacity.

Installation of Accessories:

Premium cost will be calculated for the car accessories and the extra features is calculated separately.

Coverage Type:

The premium cost will vary depending on the type of coverage. For example, Comprehensive car insurance offers higher premiums than third-party car insurance.

Fuel type:

The premium amount has different costs on the different fuel types like diesel, petrol, CNG, electric car etc. The premium differs according to the personal belongings cover, zero depreciation cover, roadside assistance etc.

Disadvantages of Zero depreciation Policy:

Although, the zero depreciation policy includes lot of benefits, it has some shortcomings also. Some of the problems of having zero depreciation policy are:

Limited Number of Claims:

Zero depreciation coverage includes only a limited number of claims that can be availed annually. However, this limitation may differ from one insurance company to another.

Higher Premium Rates:

Zero depreciation policy is bought to strengthen up the protection of car by including the add-on covers. Thus giving extra protection to the car. The main problem on buying this insurance is the cost factor. It is not suitable for the persons who are planning to buy minimal cost premium coverage.


Zero depreciation cover has a considerable exclusion. The basic exclusions included in the normal car insurance policy is covered under this policy also.This coverage is not provided for the cars that are more than 5 years old.

As the zero depreciation coverage includes a lot of benefits and one with the expensive/ new car can go for it!


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