Depreciation: Meaning, Example and How It Works in India

What does Depreciation mean?

Depreciation in motor insurance is the percentage reduction applied to the cost of replacement parts during claim settlement, reflecting wear and tear. Different parts have different depreciation rates per the Indian Motor Tariff.

For most Indian car owners, knowing Depreciation matters at the moment of buying a policy or filing a claim. The term shows up on the policy schedule, on the claim form and on the renewal proposal, often in fine print that first-time buyers do not notice until something goes wrong.

HiZuno publishes this glossary so that customers and small-business owners can decode the language of motor insurance in plain English. As of 2026, every entry reflects current IRDAI and MoRTH rules and the prevailing practice across providers in India.

How Depreciation applies in India

Per the Indian Motor Tariff, rubber and plastic parts depreciate at 50%, fibreglass at 30%, glass at 0%, and metal parts on a sliding scale from 0% (under 6 months) to 50% (over 10 years). The Zero Depreciation add-on can neutralise these deductions for a small extra premium.

A real-world example

A Chennai owner's claim for a Rs 20,000 plastic bumper replacement has 50% depreciation. The provider pays Rs 10,000 and the owner bears Rs 10,000. With Zero Depreciation, the provider pays the full Rs 20,000 minus the deductible.

Common misconceptions

Why Depreciation matters for the consumer

Depreciation deductions can take 30% to 50% off the value of replaced parts. For cars under 5 years, Zero Depreciation typically pays for itself in a single major claim.

How to handle Depreciation in practice

A simple, repeatable approach helps you stay in control whenever Depreciation shows up in your policy paperwork or claim conversation.

• Confirm the basics: verify that Depreciation is reflected correctly on the policy schedule before you pay premium.
• Cross-check with IRDAI norms: the regulator publishes the framework that governs Depreciation, so compare what your provider has filed.
• Read the policy wording: the binding contract spells out limits, exclusions and conditions in detail beyond the marketing summary.
• Document everything: keep digital copies of the policy, RC, driving licence and KYC, since most disputes turn on documentation.
• Ask before you assume: a 60-second call to the provider clarifies whether Depreciation applies to your specific situation.

Related glossary terms

Frequently asked questions about Depreciation