Zero depreciation in Car Insurance

What to know about the Zero depreciation cover while insuring a vehicle

Having to spend around Rs. 1 lakh for repairing a brand new car was no joke. But Mr. Shashi Sinha heaved a sigh of relief- he had his car covered. So, it would be the car insurance company that would pay the necessary charges. Or, so he thought. When the reality hit him, he was not quite ready for it. What the company was ready to pay was just 60% of the amount he had insured his car with.

If only he knew about the zero depreciation policy, he would have saved a lot. It was only after this harassment that it occurred to him- even a car was just another machine. And that it also depreciated by time, every bit of it.


It was not until two years ago, that this type of cover became functional in India. These policies mean to provide you with the entire insured sum when you need it for your car. Reliance General, Tata AIG General, ICICI Lombard General, HDFC Ergo General etc. are some names in the market recently that offer a zero depreciation cover for vehicle insurance. This was allowed by the Insurance Regulatory and Development Authority. Now, the venture has gained ground in the country.

Zero Dep Policies

For each part of a vehicle, the car insurance company stipulates a distinct depreciation rate. There are rates designated to

 the fragile parts of a vehicle,

 material of the vehicle,

 the metallic section and

 parts inside the car that undergo real depreciation over time.

The age of a car determines the percentage of the depreciation rate. The zero depreciation cover for vehicle insurance assures the car owner a complete claim on the money minus the deductions. The standard vehicles guidelines will make you cough up extra money to make up for the cost. This cover safeguards you from that extra cost. A no-claim bonus comes up with it and some insurers help secure that for the customers.

But Conditions Apply

Not all cars are permissible under this cover. Owners of new cars or cars that are not more than five years old can enjoy this benefit during car insurance. Also, a slightly higher premium has to be paid than the usual for a standard vehicles guidelines. Then there are initial flat payments as well. The number of times the claim for zero depreciation is also limited for a particular policy period.

Zero depreciation guidelines do not cover these certain conditions of a vehicle-

 uninsured accessories in a vehicle

 normal wearing down of the vehicle

 the danger that has not been insured

 mechanical faults

Each year, the zero depreciation policy has to be renewed because it is generally for a one year period.

With all said and done, it is a new approach to safeguarding car owners from unnecessary pocket pinch. Cars will wear out with time and that cannot be avoided. But that does not mean you will suffer the consequences when there are ways to avoid them. The complex calculations involving depreciation rates can be averted easily while repairing new vehicles. That is the sole purpose of depreciation cover.