Do you know “what is zero depreciation cover?” It is an add-on that you can include in your vehicle’s comprehensive insurance policy. This helps to offset the depreciation factor when your insurance company settles claims filed by you. Without this add-on, your vehicle’s insurer will settle your claim only after deducting the depreciation amount. Now, before discussing further details about zero depreciation cover, it is important that you have a clear understanding about the concept of depreciation.

What Is Depreciation and How Is It Calculated?

Depreciation refers to the reduction in the value of your vehicle due to the wear and it suffers over the years. The older your vehicle the higher will be its depreciation. The depreciation rates specified by the Insurance Regulatory and Development Authority of India (IRDAI) are given below. The depreciation in the value of a vehicle is calculated based on its age and these rates.

 Depreciation rates for:

  • Rubber, Plastic, and Nylon parts, and Batteries – 50 percent
  • Fiberglass Components – 30 percent
  • Wooden Parts – 5 percent in the 1st year, 10 percent in the 2nd year, and so on

Depreciation Rates Based On the Age of A Vehicle

Age of the Vehicle

Depreciation %

Up to 6 months


Above 6 months and up to 1 year


Above 1 year and up to 2 years


Above 2 years and up to 3 years


Above 3 years and up to 4 years


Above 4 years and up to 5 years



What Benefits Does Zero Depreciation Add-on Cover Offer

Helps you save money

Including the zero depreciation add-on cover to your vehicle’s standard insurance policy helps you to save some money. You don’t have to fund the depreciation portion of the claim amount. If you don’t buy this cover by paying an additional premium, the depreciation cost will have to be borne by you.

Helps you get a higher claim settlement amount

If you secure your vehicle with a Nil depreciation add-on, the insurance company will not consider the depreciation of your vehicle’s parts. This way you will receive a higher claim settlement amount during claims.

Peace of Mind

As opting for this add-on cover allows you to save some money by eliminating the need to bear the depreciation cost during claims, you can reduce your financial burden and this helps to enjoy peace of mind.

What Is Excluded In Zero Depreciation Add-on?

Driving without a license You are not eligible to receive any benefits offered by the zero depreciation add-on if you do not have a valid driving license.

DUI If you were under the influence of alcohol or drugs while driving, you cannot claim benefits under the zero-depreciation cover.

Excludes compulsory deductibles This add-on doesn’t cover any compulsory deductibles included in your motor insurance plan.

Excludes mechanical breakdowns Normal wear and tear and mechanical breakdowns of your vehicle are not covered by this add-on.

Engine oil The add-on doesn’t cover the costs of engine oil, coolant, clutch oil, etc.

How Much Does the Zero Depreciation Cover Cost?

In general, you will have to pay an additional 15 percent over the comprehensive insurance premium in order to include this add-on cover. This is a very small amount when you consider the overall protection of your vehicle. It is definitely worth it because you will save a lot of money during claims. The factors that affect the zero depreciation cover include the age of your vehicle, model, and the city in which you drive the vehicle.


Q1: My vehicle is more than 5 years old. Can I opt for zero depreciation cover for my vehicle?

A1: No, that is not allowed. You can opt for the zero or nil depreciation add-on only if your vehicle is less than five years old.

Q2: Are there any restrictions on the number of claims? Does the zero-dep cover have any impact on the settlement of claims?

A2: No, there are no restrictions on the number of claims. However, the total claims should not exceed the sum insured. If you include this add-on in your standard motor policy, it ensures that you receive the full claim amount without deducting depreciation cost.

Q3: What is the difference between comprehensive insurance and zero depreciation cover?

A3: Comprehensive insurance is a standard policy that you can buy for your vehicle. It includes both third-party and own damages coverage. It does not include zero depreciation cover, which is an add-on cover.

Q4: Is zero depreciation cover applicable only to new vehicles?

A4: Yes, vehicles up to 5 years old.

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