What happens to car insurance with no depreciation after 5 years?

Zero depreciation car insurance cover, also known as bumper-to-bumper cover, protects you from depreciation deductions on your car’s parts during claim settlement. This means you receive the full cost of replaced or repaired parts without any deduction for wear and tear. However, after your car crosses the 5-year mark, most insurers stop offering this add-on due to increased risks and lower vehicle value. Knowing what happens after 5 years and reviewing your options will help you choose the right plan at renewal.

What is zero depreciation car insurance cover?

Zero depreciation cover is an add-on to your comprehensive car insurance policy that eliminates depreciation deductions on replaced parts during a claim. Typically, insurers calculate claim amounts based on the Insured Declared Value (IDV) of your car, which reduces annually. Without this cover, depreciation is also applied to parts such as bumpers, headlights, and engine components.

For example, if your car is 3 years old, insurers may deduct 30-40% depreciation on certain parts, reducing your claim payout. With zero depreciation cover, the insurer pays the full cost of parts without deduction, reducing your out-of-pocket expenses. This cover is especially helpful for new or relatively new cars where replacement costs are high, and depreciation significantly impacts claim amounts.

Can zero depreciation cover be continued after your car is over 5 years old?

As per IRDAI guidelines, effective 2025, and general insurer practices:

• Zero depreciation cover is typically available only for cars up to 5 years old.

• After 5 years, the IDV drops significantly, and the risk of major repairs increases.

• Insurers usually discontinue zero depreciation cover or offer it with restrictions, higher premiums, and subject to vehicle inspection.
  

IRDAI depreciation tariff rates for cars beyond 5 years (applicable for claim settlements without zero depreciation cover) are as follows:

How do insurers handle zero depreciation cover after 5 years?

Insurers change their approach to risk assessment once a vehicle ages beyond five years.

• Underwriting and inspection: Insurers require a detailed vehicle inspection to assess the condition before approving zero depreciation cover beyond 5 years.

• Charging higher premiums: Insurers set significantly higher premiums for zero depreciation cover on older cars due to increased risk and lower IDV.

• Restricting availability: Insurers offer zero depreciation extensions only for select car models or under special terms.

• Recommending alternative add-ons: Insurers suggest add-ons such as engine protection, roadside assistance, or return-to-invoice cover for older cars.

Comparison of zero depreciation cover and alternatives after 5 years

Comparing different car insurance add-on covers helps you understand the protection levels available for older vehicles.

Impact of zero depreciation cover on No Claim Bonus (NCB) and claim settlement

Adding specific covers to your car insurance policy affects your long-term benefits and the total cost of ownership.

• Affecting No Claim Bonus (NCB): Making a claim under zero depreciation cover reduces your NCB, similar to standard claims.

• Lowering out-of-pocket expenses: Choosing zero depreciation cover reduces your immediate repair costs but increases your premium by 15-30%.

• Applying GST and tax implications: Paying for this add-on attracts GST at 18%, which increases the total cost as premiums rise for older cars.

Practical tips for renewing zero depreciation cover after 5 years

Following these steps can help you secure the best possible coverage for an older vehicle.

• Evaluate your car’s condition and IDV: If the car is well-maintained and IDV is reasonable, zero depreciation cover may still be cost-effective.

• Request a vehicle inspection: Some insurers require an inspection for approval; ensure your car is in good condition to pass.

• Compare various premiums: Obtain quotes from multiple insurers to find competitive rates.

• Consider available alternatives: If zero depreciation is expensive or unavailable, opt for engine protection or return to invoice cover.

• Negotiate with your insurer: Discuss your claim history and maintenance records with your insurer to negotiate better terms.

Example: Claim settlement with and without zero depreciation cover after 5 years

How to buy or renew zero depreciation insurance for your car beyond 5 years?

You can easily renew or purchase your policy online by following these simple steps.

1. Visit the Zurich Kotak website or mobile app.

2. Enter your car’s registration and policy details.

3. Choose a comprehensive insurance plan that fits your needs.

4. Select the zero depreciation add-on from the list of options.

5. Complete a vehicle inspection if requested by the insurer.

6. Pay the insurance premium securely online.

7. Receive your policy confirmation instantly via email.

Conclusion

Zero depreciation car insurance protects you from high repair costs by covering the full price of replaced parts during a claim. While it is most common for the first five years, some insurers allow you to extend it further under specific conditions. By understanding depreciation rates and exploring alternatives like engine protection, you can ensure your aging vehicle remains well-protected. Always check your car's value and compare different plans to make the best choice for your budget.

FAQs

Can I get zero depreciation insurance beyond 5 years?

Yes, some insurers offer this cover beyond 5 years, but it usually depends on a vehicle inspection and a higher premium.

Can I buy zero depreciation cover mid-term after 5 years?

No, you generally cannot add this cover in the middle of a policy year. It must be added at the time of renewal.

Does zero depreciation cover consumables like oil and nuts?

No, this cover does not include consumables like oil, nuts, bolts, or brake pads. You need a separate Consumables Cover for those items.

How does depreciation affect claims after 5 years?

If you do not have zero depreciation cover, the insurer will deduct a percentage of the part's value based on its age, which means you have to pay more out of your own pocket.

Does zero depreciation cover affect my No Claim Bonus?

Yes, making a claim under this cover will reduce or reset your No Claim Bonus just like any other claim.

Is zero depreciation cover worth it for cars older than 5 years?

It is worth it if the cost of the premium is low compared to the potential cost of expensive spare parts for your car.

Can zero depreciation cover improve my car’s resale value?

It does not directly increase the price, but it shows the buyer that the car has been well-maintained and repaired using high-quality parts.

Does zero depreciation cover transfer if I sell my car?

Zero depreciation cover is linked to the insured vehicle and policy; it typically does not transfer to a new owner.

Should you get zero depreciation insurance?

You should get zero depreciation insurance if you own a new or relatively new car, want to minimise out-of-pocket expenses during claims, and prefer full coverage for parts without depreciation deductions. However, for cars older than 5 years, it is important to compare the higher premium with the potential claim benefits before making a decision.

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