The Importance of Having Zero Depreciation Car Insurance

Car insurance is extremely helpful. It protects you from the financial impact of numerous unfortunate events and gives you complete peace of mind from the perils of the road. With a comprehensive car insurance policy, you get coverage against accidents, theft, flooding, vandalism, earthquakes and several other man-made & natural calamities. However, there is one thing that escapes the cover of a standard car insurance policy - that is depreciation!

Depreciation is the reduction in value of your car and its parts due to wear and tear. In case of a claim, the insurance company will provide compensation based on the depreciated value of the vehicle and its parts. This means that the policyholder has to cover the gap between the depreciated value of parts and their actual replacement cost.

Fortunately, you can easily bypass depreciation & its effect on your claims by opting for the depreciation waiver or zero depreciation add-on. With this optional cover, your policy will offer full compensation for part replacements. This will ensure higher payouts and lower out of pocket expenses in case of a claim. Super isn’t it! Want to know more? Come on, let’s understand how depreciation waiver or zero depreciation car insurance works.


Let us look at the importance of depreciation waiver cover through an example:

Mr A met with an accident while returning from the office and his old car suffered some serious damages. He expected that he will get a high claim amount for it. What he did not take into account is the fact that his car was old and its value had depreciated. And since he hadn’t read the policy terms and conditions, he was left in a pickle. On the other hand, is Mr B who faced a similar scenario, but owing to the fact that he had depreciation waiver or zero depreciation car insurance and was well-versed with the policy terms and conditions, his out-of-pocket expenses were next to none at the time of getting his car repaired.


How is depreciation calculated on my car?

Two things lead to the depreciation of your car. The first is wear and tear. The second is age. Calculating the depreciation for each car based on its age and usage could into a tedious task.

Keeping this in mind, the Insurance Regulatory and Development Authority of India (IRDAI) has set uniform depreciation rates for cars. This helps calculate the depreciation of vehicles with ease. Below is the table highlighting the rate of depreciation as per the age of the vehicle.

Age of the vehicle:

Rate of depreciation:

Below than 6 months


Between 6 months and 1 year


Between 1 year and 2 years


Between 2 years and 3 years


Between 3 years and 4 years


Between 4 years and 5 years


Between 5 years and 10 years


Above 10 Years


How is a Car Insurance Policy with Zero Depreciation Different from a Standard One?


There are 3 main differences between depreciation waiver or zero depreciation car insurance and a standard comprehensive policy. These differences pertain to the claim compensation, cost and the eligibility age of the vehicle. We have explained all 3 points of difference below to ensure you are able to easily distinguish between these 2 kinds of coverage.

Claim compensation: Well to start with, the most obvious difference is that a policy with zero depreciation does not involve depreciation and is conceptualized for full settlement. In comparison, a standard cover offers a claim based upon the current value of the car, i.e. after depreciation.

So it is but obvious that if your car suffers damage due to an accident, your standard policy will reimburse the claim minus the depreciation whereas the policy with zero depreciation will address the claim regardless of the current value of your car.

Cost: Depreciation Waiver or Zero depreciation cover is an optional extra. Therefore, if you wish to include this add-on to your comprehensive car insurance policy, you have to pay a slightly higher premium. That is why zero depreciation car insurance is more expensive than a standard comprehensive cover. However, the coverage zero depreciation insurance provides you is well worth the extra amount that you pay!

Eligibility age of the vehicle: You can buy a standard comprehensive car insurance policy no matter how old your vehicle is. It doesn’t matter if your car is 1 year old or 15 years old, you can protect it with a comprehensive car insurance policy. Zero dep car insurance plans, on the other hand, can only be purchased for newer vehicles. In fact, some insurance providers will only offer this cover if your car is below 5 years of age.


What are the benefits of Depreciation Waiver or zero dep car insurance:

Wondering whether you should opt for standard cover or purchase zero dep car insurance? Well the latter has several amazing benefits that will give you added peace of mind every time you get behind the wheel of your car.  We have listed some of these benefits below to help you make an informed purchase decision.


1. Offers higher payout in case of a claim

Say you do not have zero depreciation car insurance and you need to make a claim against your policy. In this case, you will receive compensation for replacements based on the depreciated value of parts.

This can result in much lower payouts, especially given the rate of depreciation on the various parts of your car – 50% on plastic, nylon and rubber parts, 30% on fibre parts and 5% to 50% on metallic & wooden parts.

Fortunately, depreciation waiver or zero dep car insurance does not consider depreciation when settling your claims. This will ensure you get a much higher payout for part replacements.

2. Better savings

Since zero depreciation car insurance offers higher payouts, it keeps your out-of-pocket expenses to a minimum. This ensures that, in case of a claim, you do not have to use your hard-earned money to cover the cost of part replacements.

3. Affordable

You would think that, for the amazing coverage that zero dep car insurance provides, it would have a very high premium attached to it, right? Well, on the contrary, the cost of this optional add-on is not much. Adding zero depreciation cover to your comprehensive car insurance policy shouldn’t pinch your pocket much.


Why choose IFFCO-Tokio for your zero-dep car insurance policy?

Our main goal is to provide you with better coverage for your vehicle. We use our 20+ years of experience to provide customer-centric insurance options! That’s why, when you choose IFFCO-Tokio for your Depreciation Waiver or zero depreciation car insurance, you get a host of super benefit such as:

No limit on the number of claims:

Most insurance providers will restrict the number of claims you can make against your zero depreciation insurance policy. For instance, some plans will allow you to make only one claim against your policy in a year. However, we are the exception to the norm as our car insurance policies don’t have any limit on the number of claims you make.

More than 4,500 cashless garages:

If you ever need to make a claim against your zero depreciation insurance, we make it easier for you to get it settled. We have over 4,500 cashless garages all over India where you can get your car repaired without worrying about the cost.

Claim settlement ratio of 92.65%:

We settled a total of 8.61 lakh claims in FY2019 and have a claim settlement ratio of 92.65%. Therefore, if you ever need to make a claim against your zero depreciation insurance policy, with us, there is a good chances it will be settled!


Exclusions of Depreciation Waiver or zero depreciation car insurance:

Zero dep cover is an extremely useful add-on. It ensures you get higher payouts in case of a claim and ensures that repair costs do not burn a hole in your pocket. However, even with zero dep insurance, there are a couple of things that you are not covered for. These are known as exclusions and it is important you know about them before buying a plan.


1. Cars older than 10 years old

This is one of the first things that are excluded from the cover of zero depreciation car insurance policies. If your car is older than 10 years old, it cannot be covered by a zero dep car insurance policy.

2. Replacement of certain parts

Tyres, tubes, consumables such as oil, nuts, bolts and some other parts are usually not covered under zero depreciation insurance. Make sure to cross-check this before buying your policy.

3. Mechanical breakdown

Many people assume that since mechanical breakdowns are often caused due to wear and tear they will be covered by zero depreciation insurance. However such instances are not covered. Along with this, engine damage due to water ingression or oil leakage is also not covered by zero depreciation insurance.

4. Total loss or theft

Zero deprecation car insurance is only applicable on part replacement. It does not cover total loss or theft of the vehicle. In this case, the insurance provider will compensate the policyholder based on the market value of the car.


Who should buy zero depreciation car insurance?

Not sure whether you should buy zero-dep cover or not? Well, that’s completely understandable. After all, this type of cover is not suitable for everybody. It holds more value for certain car owners than it does for others. Keeping this in mind, we have highlighted some vehicle owners who could benefit immensely from zero depreciation insurance. If you fall into any one of the categories mentioned below, then you should consider purchasing this add-on.

New car owners: New car owners should definitely purchase zero depreciation car insurance. This is because a new car depreciates in value very quickly. After just 6 months, the value of your car parts will have already dropped by 5% and will continue to do so every year. This can result in significant expenses in case of a claim. Keeping this in mind, most insurance expert usually advice new car owners to opt for zero depreciation car insurance.

Luxury/Expensive car owners: The cost of parts is generally much higher with luxury/expensive cars. Therefore, if you have to cover the gap between the depreciated value and the actual cost of the part, it could leave a dent in your wallet. That’s why, if you own an expensive car, it makes sense to opt for zero depreciation insurance.

New drivers: New drivers are more susceptible to accidents and therefore more likely to make a claim. However, without zero depreciation insurance, they could face massive expenses! Hence, to safeguard themselves from the financial impact of accidents, new drivers should get zero dep insurance cover.

**To understand exactly about the policy coverage, exclusions, etc. read the Policy Wordings carefully.**

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