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How a Zero-Dep Insurance Policy Benefits You During Claims

The Motor Vehicles Act, 1988, makes Third-Party Insurance mandatory for motor vehicle owners plying on the public roads. Motor Insurance covers the costs and the legal liability you cause to the third-party in times of an accident. This may include any physical injury, death, or damage caused in times of an accident. The third-party cover may not include any repair of damage to your motor vehicle or yourself but to third-party.

A Car Insurance policy often comes with a comprehensive bundle and an add-on package from different insurance companies, each screaming of its benefits and allowances. However, a careful assessment and personal discernment have to be exercised on the part of the policy buyer before zeroing in on any car insurance policy.

Your Car and Depreciation

Depreciation is an important aspect of any physical asset and the assessment of its value. Depreciation is the continuous loss in the recorded value of an asset over a while. The monetary value of an asset may decrease due to wear and tear, damage or the product becoming obsolete. Your car is also no exception. The value of your car also starts decreasing the moment it leaves the showroom. This reduction in the value comes because of the fluctuating values of the component material like steel, iron, plastic, etc.

In case of damage or an accident, when you file an insurance claim, the insurance company will first assess the depreciated value of your car because of the damage caused.

What is a Zero-Dep Insurance Policy?

Since the value of a motor vehicle depreciates over time, in case of an accident, the policy owner may not be able to recover the full amount of the vehicle. The general motor insurance plans will only pay a calculated amount minus the depreciated amount. The difference of the amount has to be paid by the policy owner.

In case of a Zero-dep Insurance cover, you can claim maximum reimbursement at the time of claim. As the name suggests, such kind of motor insurance plans provides a comprehensive cover without depreciation deductions. For example, if your motor vehicle gets damaged in an accident and you do have a Zero-Dep Insurance cover; your insurer will cover the entire cost at the time of claim.

Types of Motor Insurance Plans

  • Normal or General Motor Insurance -This is the regular motor vehicle insurance where at the time of insurance claim, the payoff amount is based on the current value of the vehicle, which is estimated after deducting depreciation costs.
  • Zero Dep Motor Insurance- This insurance cover promises maximum reimbursement or full settlement amount without depreciation cost deductions.

Features of a Zero Dep Insurance Cover

  • It is also known as Nil Depreciation Insurance or Bumper to bumper insurance cover.
  • It gives a complete insurance cover with a full settlement amount without depreciation.
  • The insurance company bears the entire cost of the settlement.
  • Its premium is 15% to 20% higher than the premium for a normal insurance cover.
  • It is preferable for new cars or cars for less than three years old.
  • It is recommended for owners of luxury cars or those who drive cars in high-risk zones so that the full settlement amount is ensured at the time of claim.
  • The Zero Dep premium is dependent on the age, model, and location of your motor vehicle.
  • This type of insurance is favorable for people with new cars, luxury vehicles, or cars with relatively costly repair parts or those who stay and drive cars in risk or accident-prone areas.

Difference between General Insurance and Zero Dep Insurance Cover

Type of Insurance


Cost of Repair

Claim Settlement

Vehicle Age



Less cost

Only part payment by the insurance company, the owner has to pay more

Claim amount has depreciation deductions as well

Can be taken for vehicles that are more than five years of age

Zero Dep Insurance

15%-20% higher cost

The insurance company pays the maximum amount

Claim amount excludes depreciation factor

Up to 5 years or new vehicles

Benefits of taking Zero-Dep Insurance Cover

  • In case of damage to your vehicle in an accident or road mishap, your Zero-Dep Insurance cover will help you retrieve the entire cost of a settlement.
  • Since the insurer will cover the entire settlement amount as depreciation is not counted in the claim, it will help you save a lot of out-of-pocket expenses.
  • It adds more intrinsic value and benefits to your vehicle insurance.
  • It adds to your peace of mind as it saves a lot of money and energy at the time of claim settlement in case of a road mishap.

Who Should buy Zero-Dep Insurance Cover?

  • Owners with new and expensive vehicles
  • Relatively new drivers who may be prone to accidents
  • People living in high road risk or accident-prone areas
  • If a vehicle has expensive spare parts

Only new car owners don't need to buy Zero Dep Insurance cover. It is a good add-on to purchase for any car-owner if he/she can support the slightly higher premium. Also, if the car is older than five years, it is not a cost-effective option to shell out an extra premium for an aging vehicle.


Q. Is it worth buying a Zero-Dep Insurance cover?

A Zero Dep Insurance cover certainly provides more benefits in terms of full settlement cost when an insurance claim is made. However, its premium is also higher than that of a regular vehicle insurance cover.

Q. Is Zero-Dep Insurance cover only for new vehicles?

It will be more beneficial for vehicle owners whose vehicles are below five years old and not necessarily new and expensive.

Q. What is the IDV?

The IDV is the Insured Declared Value of a vehicle or the current market value after adjustment of depreciated costs fixed by the insurance company based upon the ex-showroom price of the vehicle.

Q. On what factors does the Zero-Dep Insurance premium depend?

It depends on three factors:

  • Age of the vehicle
  • Model and type of the vehicle
  • Owner’s location
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