Nikhil Kapoor filed his first claim on his two-year-old hatchback after a parking-lot dent, expecting the insurer to cover the Rs. 18,000 repair in full. The cheque was for less than half of it. A 34-year-old who assumed comprehensive meant complete, he learned the hard way that his policy had quietly subtracted depreciation on every plastic part it replaced.
That gap between the repair bill and the payout is what depreciation reimbursement, better known as zero depreciation cover, exists to close.
Depreciation in car insurance is the reduction in your car's value and its parts' value, as it ages. Under a standard comprehensive policy the insurer deducts depreciation on replaced parts, so you pay a share of the repair yourself.
Depreciation reimbursement, the zero depreciation add-on, removes that deduction so the insurer pays the full cost of parts, leaving you only the compulsory deductible. Two separate depreciation tables apply in car insurance, one for parts in a claim and one for the car's insured value and confusing them is the most common mistake owners make.
What is depreciation in car insurance?
Depreciation is the fall in value of your car and its parts over time from age and wear. In a claim, the insurer pays the depreciated value of replaced parts, not their full cost, so you bear the difference.
Every car loses value from the moment it is driven and so does every part on it. When you replace a damaged part during a claim, the insurer does not pay what a new part costs; it pays what your old part was worth after depreciation.
This matters most on the parts that depreciate fastest. A plastic bumper carries a flat 50 percent depreciation regardless of the car's age, so the insurer covers only half its replacement cost and you pay the rest.
Depreciation is also why an older car receives a smaller settlement than a newer one for the identical repair. The same bumper on a five-year-old car returns less than on a one-year-old car, because the deduction rises with age for most parts.
Are there two different depreciation tables in car insurance?
Yes and this is the point most owners get wrong. One table sets depreciation on parts replaced in a claim and a separate table sets depreciation on the car's Insured Declared Value. They use different percentages and apply to different things.
The two tables serve two different jobs and mixing them up leads to wrong expectations about a payout.
Part-claim depreciation decides how much the insurer pays for a replaced part in an own-damage claim. IDV depreciation decides your car's overall insured value, which sets your premium and the maximum payout in a total loss. The figures do not match, so the schedule that applies depends on what is being calculated.
Table: The two depreciation schedules compared
Vehicle age | Part-claim depreciation (metal and other parts) | IDV depreciation |
Up to 6 months | Nil | 5% |
6 months to 1 year | 5% | 15% |
1 to 2 years | 10% | 20% |
2 to 3 years | 15% | 30% |
3 to 4 years | 25% | 40% |
4 to 5 years | 35% | 50% |
5 to 10 years | 40% | By mutual agreement |
Over 10 years | 50% | By mutual agreement |
Both schedules come from the India Motor Tariff. When someone quotes a depreciation figure, the first question is which table they mean, because a "50 percent" figure means one thing for a five-year-old car's IDV and another for its parts.
How is depreciation deducted on parts during a claim?
Each replaced part is depreciated by its own rate: a flat percentage for plastic, rubber, fibre and glass and an age-based rate for metal parts. Labour is usually paid in full.
Depreciation is applied part by part, not to the claim as a whole and the rate depends on what the part is made of.
Table: Part-type depreciation rates in a car insurance claim
Part type | Depreciation rate |
Rubber, nylon, plastic parts, tyres, tubes, batteries, airbags | 50%, fixed regardless of age |
Fibreglass components | 30% |
Glass parts, such as the windscreen | Nil |
Metal and other parts | By vehicle age, per the table above |
Labour charges are typically paid in full without depreciation and third-party liability claims are not subject to depreciation at all, since it applies only to your own vehicle's parts.
Worked example. Your 3-year-old car needs a plastic bumper (Rs. 8,000) and a glass headlight (Rs. 5,000). The bumper attracts 50 percent depreciation, so the insurer pays Rs. 4,000. The glass has nil depreciation, so the insurer pays the full Rs. 5,000.
Your total payout is Rs. 9,000 and your out-of-pocket cost is Rs. 4,000, before any compulsory deductible . With zero depreciation cover , the insurer would have paid the full Rs. 8,000 on the bumper too, leaving you only the deductible.
What is depreciation reimbursement or zero depreciation cover?
It is an add-on to a comprehensive or own-damage policy that removes the depreciation deduction on replaced parts, so the insurer pays their full cost. It is also called nil depreciation or bumper-to-bumper cover.
Depreciation reimbursement and zero depreciation are the same thing under different names and the effect is straightforward. Without it, the insurer pays the depreciated value of parts; with it, the insurer pays the full replacement value, subject to policy terms.
The saving is largest exactly where depreciation bites hardest, on plastic, rubber and fibre parts that carry a flat 50 or 30 percent deduction. On a modern car, where bumpers, panels and trim are largely plastic, that covers a great deal of a typical accident repair.
It is available only with comprehensive or standalone own-damage cover, never with a third-party-only policy and most insurers offer it for cars up to five years old, some beyond.
What does zero depreciation cover not cover?
It removes depreciation on parts, but not the compulsory deductible, consumables, mechanical or electrical breakdown or normal wear and tear. Some parts like tyres and batteries may need separate add-ons.
This is where expectations often outrun the policy. Zero depreciation is powerful but not total and knowing its edges prevents a second surprise at claim time.
The compulsory deductible still applies. A fixed amount is always subtracted from any own-damage claim.
Consumables are separate. Engine oil, coolant, nuts and bolts need a consumables add-on.
Mechanical and electrical breakdown is excluded. Zero dep covers accident damage to parts, not a part that simply failed.
Wear and tear is not a claim. A part worn out through use is maintenance, not accidental damage.
Claim count may be capped. Many policies limit zero-dep claims to two or three in a policy year.
Some parts are treated specially. Tyres and the 12-volt battery may fall outside the add-on and need their own cover.
Read the policy wording for the exact list, since the treatment of tyres, batteries and claim limits varies between insurers.
Is zero depreciation cover worth it for your car?
For a car under five years old, usually yes, because modern parts are largely plastic and depreciation on them is steep. For an older or low-value car, the extra premium is harder to justify.
The decision turns on the age and value of your car and how much of a repair the deduction would eat.
Table: Who benefits most from zero depreciation cover
Your situation | Zero depreciation worth it? |
New or near-new car, under 3 years | Strongly, depreciation is highest and parts are costly |
Car 3 to 5 years old | Usually, especially with expensive plastic-bodied panels |
High-value or luxury car | Yes, part costs make the deduction large in rupee terms |
Frequent driver or accident-prone city | Yes, claims are more likely |
Older car, over 5 to 7 years | Often not, the premium may outweigh the benefit |
Low-value car you plan to replace soon | Usually not worth the added premium |
A simple test helps. If a single realistic repair would see depreciation take more than the add-on's annual premium, the cover pays for itself in one claim. On a newer car, it usually does.
Zurich Kotak General Insurance offers a zero depreciation add-on with its comprehensive car insurance and the policy wording sets out the eligibility and what each add-on covers.
How does depreciation affect your insurance premium?
Depreciation lowers your car's IDV each year, which reduces your own-damage premium, but it also lowers the maximum the insurer will pay in a total loss.
Premium and payout move together here. Own-damage premium is calculated as a percentage of the IDV, so as depreciation cuts the IDV, the premium falls with it.
The trade is real. A car with an IDV of Rs. 8,00,000 in year one might sit at Rs. 5,00,000 by year four, which lowers the premium but also lowers the ceiling on a total-loss or theft settlement, since the IDV is the maximum the insurer pays.
This is why it is worth checking the IDV at each renewal rather than simply accepting the lowest premium. An IDV set too low saves a little now and costs a lot if the car is written off.
Conclusion
Nikhil added zero depreciation cover at his next renewal, once he understood that the deduction on plastic parts was what had shrunk his first claim. His car was still under five years old, his city sees plenty of parking scrapes and a single repair would recover the add-on's cost.
What changed Nikhil's mind was seeing the two things clearly. Depreciation on parts is what reduces a repair payout and the zero-dep add-on is what removes it, for the price of a modest premium increase.
Do the same arithmetic on your own car. Check its age against the five-year eligibility window, weigh one realistic repair's depreciation against the add-on premium and keep the IDV honest at renewal. Comprehensive cover protects your car; understanding depreciation is what makes sure the protection reaches your pocket when you claim.
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Frequently asked questions
What is depreciation reimbursement in car insurance?
It is another name for the zero depreciation add-on. It removes the depreciation deduction on replaced parts during a claim, so the insurer pays their full cost rather than the depreciated value, leaving you only the compulsory deductible.
Is depreciation waiver the same as zero depreciation cover?
Yes. Depreciation waiver, depreciation reimbursement, nil depreciation and bumper-to-bumper cover all refer to the same add-on that prevents depreciation being deducted at claim settlement.
Does depreciation apply to third-party insurance claims?
No. Depreciation applies only to own-damage claims on your own vehicle's parts. Third-party liability claims are settled on the damage caused to the third party, with no depreciation deduction.
How is depreciation calculated on car parts?
Per part. Rubber, plastic, tyres, batteries and airbags carry a fixed 50 percent, fibreglass 30 percent, glass nil and metal parts a rate that rises with the car's age. Labour is usually paid in full.
Can I buy zero depreciation cover for a car older than five years?
Most insurers limit it to cars up to five years old, though some offer it beyond that at a higher premium. For an older car, weigh the added premium against how much a realistic repair's depreciation would cost you.
Does zero depreciation cover the whole claim?
No. It removes depreciation on parts, but the compulsory deductible, consumables, mechanical or electrical breakdown and normal wear and tear are still excluded unless separate add-ons are added.
Does an insurance claim reduce my car's value?
Not its IDV, which is recalculated at renewal on age alone. But a car with a history of major repairs may fetch less in the used market, even though the insurance valuation does not reflect that directly.
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