Zero depreciation car insurance: is It worth buying?

A small accident can create a surprisingly large repair bill. A bumper, headlamp or door panel may need replacement, and while your car insurance policy may cover the damage, depreciation deductions can reduce the claim amount, leaving you to pay the difference.

This is where zero-depreciation car insurance can help. Also known as nil depreciation or bumper-to-bumper cover, this add-on reduces the impact of depreciation deductions on eligible parts during claim settlement.

The need for adequate motor insurance is particularly relevant in India. According to the Ministry of Road Transport and Highways, 480,583 road accidents were reported in 2023, resulting in 172,890 deaths and 462,825 injuries. While insurance cannot prevent accidents, the right coverage can make their financial consequences easier to manage.

What is zero-depreciation car insurance?

Zero-depreciation car insurance is an optional add-on that can be purchased with an eligible own-damage or comprehensive policy. Under a standard policy, depreciation may be deducted from the value of certain parts when a claim is settled. With zero depreciation cover, the applicable depreciation deduction on covered parts is waived, subject to the policy's terms, conditions, exclusions and limits.

For example, if an accident damages plastic or fibre components costing ₹30,000 to replace and ₹9,000 depreciation applies, a standard claim could leave you paying that amount, subject to other deductions. With zero depreciation, the applicable depreciation deduction on eligible parts may be covered, potentially reducing your out-of-pocket expense.

Zero depreciation does not mean every repair expense is paid in full. Deductibles, exclusions, claim limits and other conditions continue to apply.

How does zero depreciation cover work?

When certain parts are replaced after an accident, insurers may account for depreciation while calculating the claim. Zero depreciation changes how that deduction is handled for eligible parts.

This is an illustration, not a guaranteed claim calculation. Actual settlement depends on the parts involved, deductibles, exclusions and policy terms.

What are the benefits of zero depreciation car insurance?

The biggest advantage is lower out-of-pocket expenses during eligible repairs. Since depreciation deductions on covered parts are reduced or eliminated, a greater portion of the repair cost can be covered by the insurer.

This can be useful when replacing bumpers, plastic, rubber, fibre or other components that may attract depreciation. It can also make repair costs more predictable after an accident.

For new car owners, this may be particularly relevant because replacement parts can be expensive. Paying a higher premium upfront may be preferable to facing larger depreciation deductions during a claim.

Who Should Consider Zero Depreciation Cover?

Zero depreciation is generally most relevant for new cars and vehicles within the insurer's eligible age range. It may be worth considering if you own a new or high-value car, drive frequently in busy traffic, or want to minimise unexpected repair expenses.

It may be less suitable for older vehicles if the insurer does not offer the add-on for that vehicle's age. The decision depends on the car's age, repair costs, usage, premium difference and your willingness to pay repair expenses yourself.

Zero depreciation vs standard car insurance: what is the difference?

How much does zero depreciation car insurance cost?

There is no single price for zero depreciation cover. The additional premium depends on factors such as the vehicle's make and model, age, location, IDV, base policy and insurer pricing.

Consider the additional premium against potential depreciation deductions. For instance, if the add-on costs ₹3,000 more but an eligible repair could otherwise involve a ₹10,000 depreciation deduction, it may offer meaningful financial value. However, the benefit may be lower if repair costs are small or you rarely make claims.

What is usually covered under zero depreciation?

Depending on the policy, zero depreciation protection can apply to eligible replacement and repair costs involving components such as plastic, rubber, glass and fibre.

Coverage varies, so always check the policy wording. Deductibles, exclusions, consumables, consequential losses and other conditions may still apply.

Is zero depreciation car insurance worth buying?

For many owners of newer cars, zero depreciation car insurance can be worth the additional premium because it reduces depreciation-related deductions during eligible claims. The value can become more apparent when repairs involve expensive or multiple components.

However, it is not necessarily suitable for every vehicle. Older cars may face eligibility restrictions, while low-usage drivers may prefer a lower premium and accept higher claim deductions.

Compare the additional premium, vehicle age and value, expected repair costs, claim limits and exclusions before deciding.

How to add zero depreciation cover to your car insurance

You can generally select zero depreciation when purchasing or renewing an eligible motor insurance policy. If you already have a comprehensive car insurance policy, check whether the add-on can be added at renewal, subject to the insurer's eligibility criteria and policy terms.

Final takeaway

Zero depreciation is essentially a choice between paying a little more for broader repair-cost protection or accepting potentially higher depreciation deductions during an eligible claim. For new and relatively new cars, particularly those with expensive replacement parts, the additional premium can make sense.

The key is to treat it as part of a wider insurance decision rather than as a standalone product. Start with adequate base coverage, understand your comprehensive car insurance policy, check the add-on's eligibility and claim conditions, and then decide whether the additional protection matches your car and driving needs. With Zuno, you can explore suitable car insurance coverage and add-ons based on your vehicle and protection requirements.

FAQs

What is zero depreciation car insurance?

Zero depreciation car insurance is an add-on that reduces or waives depreciation deductions on eligible parts during a covered claim, subject to the policy's terms, conditions and exclusions.

Is zero depreciation car insurance worth it?

It can be worthwhile for owners of new or relatively new cars who want to reduce their out-of-pocket expenses from depreciation deductions during eligible claims.

Is zero depreciation included in comprehensive car insurance?

No. Zero depreciation is generally an optional add-on and is not automatically included with every comprehensive car insurance policy.

How does zero depreciation insurance work during a claim?

The insurer may waive the applicable depreciation deduction on eligible parts, subject to deductibles, exclusions, limits and other policy conditions.

What parts are covered under zero depreciation insurance?

Depending on the policy, the add-on may cover depreciation on eligible plastic, rubber, fibre and other specified components. The exact coverage varies by insurer and policy.

Is zero depreciation available for old cars?

Eligibility depends on the insurer, vehicle age and policy terms. Many insurers restrict zero depreciation cover to vehicles within a specified age range.

Does zero depreciation cover the entire repair bill?

No. Deductibles, exclusions, consumables, consequential losses and other applicable costs may still be payable by the policyholder.

Can I add zero depreciation cover when renewing my car insurance?

You may be able to add it when renewing an eligible policy, subject to the insurer's eligibility criteria and terms.

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ARN: Zuno/Blog/DM/Zero Depreciation Car Insurance: Is It Worth Buying?/08/26/14