Posted on Oct, 2019 by PINC Insurance

An expense of Rs 40,000 left Mr. Mandar Deshmukh fuming after the accident. The comprehensive car insurance policy that he had purchased only reimbursed Rs 60,000 after factoring in the depreciation. Mandar could have avoided this hefty expense towards repair of his new car if he would have opted for a zero-depreciation policy.

“Zero depreciation” is a term relatively less used by the insurance brokers while suggesting a policy. At the time of issuing insurance, the insurers calculate IDV (Insurer Declared Value) of the vehicle considering factors like depreciation, thereby reducing the liability to a certain extent. A zero - depreciation is basically a policy add-on which guarantees full claims in case of an accident or damage. This add-on feature comes at a substantially higher cost (premium) but saves a hole in the owner’s pocket.

The depreciation rate consideration varies among different companies. However, there are certain industry standards which are in practice. Some parts of the car age faster than the others. Based upon this logic the insurer generally applies different rates for different parts of the car. Rubber, plastic, tyres and tubes such parts are exposed to maximum wear and tear and hence, they generally face a higher rate of depreciation. Metallic parts are depreciated based on the age of the vehicle.

IRDAI has set some guidelines regarding depreciation rates for car parts:

  • 50% forparts which face high mechanical wear and tear like batteries, tyres, plastic and rubber parts
  • 30% for fiber and glass component parts
  • 0-50% for metallic parts which depend onage of the vehicle. Older the vehicle, higher will be the rate of depreciation

A zero-depreciation policy is offered by the insurer on new cars and generally extends to the cars that are not more than five years old. Also, to avoid excessive claims, a restriction on the number of claims is imposed by the insurer which is generally up to two claims per year.

A zero depreciation insurance policy comparatively has a higher premium than the comprehensive car insurance policy. The premium varies on several factors like car’s age, model and driver’s location. If the driver dwells from an accident-prone area the premium is priced a bit higher to compensate for the unforeseen factors.

Who should buy such a zero-depreciation car insurance policy?

A zero-depreciation policy is more suitable for a new car owner. In the wake of alarming traffic on Indian roads, it becomes important for a new car to be fully covered. A lot of new drivers prefer zero depreciation policy than the experienced ones. However, accidents can be encountered by anyone in case of a fault by the third party. For a luxury car owner, a zero depreciation policy justifies the peace of mind as all the parts will have exorbitant prices.

Bewildered in picking up the right policy? Connect with our experts at and get the policy that best serves your need.