Zero Depreciation Cover: How Does It Benefit During Claims?

Commercial vehicle insurance comes in handy in protecting the insured vehicle, that is being used for the commercial purpose. The policy covers the financial implications that may arise due to any loss or damage caused by accidents, theft, vandalism, natural or man-made calamities etc. When a comprehensive vehicle insurance policy covers the vehicle against all the mentioned perils, there is one that remains uncovered by standard commercial vehicle insurance. Read more

Yes, we’re talking about DEPRECIATION!

But what’s depreciation?

Let’s us explain…

Depreciation is an important aspect to be considered at the time of deciding the IDV of online commercial vehicle insurance. It is the reduced value of the insured vehicle’s parts due to normal wear and tear. Every vehicle gets its original value reduced with time. Even the showroom price gets depreciated by 5% the moment the vehicle is out from the showroom. In case of insurance coverage, the insurance company decides the IDV or sum insured amount based on the depreciated value of the vehicle. That means the insured will have to bear the gap between the depreciated and actual replacement costs of those parts.

What’s the solution then?

Thankfully, you have Zero Depreciation Cover!

What’s Zero Depreciation cover in Commercial Vehicle Insurance?

There is a way to bypass your vehicle depreciation during the time of claims by opting for the depreciation waiver cover. Commonly known as Zero Depreciation Cover or Nil Depreciation Cover, it is an add-on benefit to be availed with the standard commercial vehicle insurance. With this cover, the insurance policy will compensate the entire claim without considering the depreciated price of the vehicle and this way ensures higher pay outs at the time of claim. The policy covers parts such as plastic rubber parts batteries, Tubes, nylon parts, airbags etc.

Brilliant isn’t it?

Want to know more about this add-on cover?

Let’s understand how important zero depreciation cover is and how it works with the standard vehicle insurance plan.

How is Depreciation Calculated?

Two things that have direct impact on the depreciation, the wear and tear and second is the age of the vehicle. As calculating the depreciation based on the vehicle’s age and usage is a tedious task, the IRDAI has set some uniform depreciation rates for the vehicles. The below table shows the various depreciation rates as per the vehicle age:

Vehicle Parts

Depreciation Rates

Rubber, Plastic Parts, Nylon Parts and Batteries


Fiber Glass items


Wooden Parts

5% (1st year), 10% (2nd year) and so on

Let’s see the percentage of depreciation applicable in the vehicles:

Vehicle Age

Depreciation %

Less than or up to 6 months


From 6 months- 1 year


1 year- 2 years


2 years-3 years


3 years-4 years


4 years-5 years


How Does the Policy Benefit During Commercial Vehicle Insurance Claim?

Still confused about whether you should go for this add-on along with the standard vehicle insurance policy or not? Well, clubbing them has several astounding advantages that offer additional peace of mind every moment you get your vehicle out on the roads. Listed below are some of them:

  • Offers Higher Coverage at the Time of Claim: Without this cover, you’ll have to bear the depreciated cost of some of the vehicle parts. That means, the compensation is paid by the insurance company based on the depreciation value of the vehicle. As you can assume from the above-mentioned table of the depreciation rates, the pay outs will be comparatively lower than the one with a zero depreciation cover. With this cover, you can even cover plastic, rubber, nylon parts, fiber and wooden parts as well.
  • Encourages More Savings: With the benefits of higher pay outs at the time of claims, the policy helps in keeping the out-of-pocket expenses to a minimum. This prevents you from using your savings by providing a financial backup in case of an emergency repair of the insured vehicle.
  • Supper Affordable: Don’t think that the cover comes with a high premium looking at the amount of coverage it offers. Zero depreciation cover is extremely affordable. Adding this cover to the existing commercial vehicle insurance is very easy yet affordable.

Zero Depreciation Cover Vs Standard Commercial Vehicle Insurance

Although linked to each other, both the policies are different from each other in 3 ways. These pertain to the cost of the cover, compensation under claims and eligibility age of the insured vehicle

  • Cost of the Cover: Being an additional cover, zero deprecation comes with an extra premium. So, availing this cover means you will have to pay some extra premiums apart from the one you pay for your standard vehicle insurance policy. This way, the policy can be more expensive than a standard policy, however, the coverage offered is worth whatever you pay.
  • Claim Compensation: The most obvious difference between the two is that a policy with zero dep cover doesn’t include the depreciation and thus pays for the full compensation at the time of claims. On the other hand, a regular motor insurance policy will compensate only after calculating the depreciated parts of the vehicle.
  • Thus, if your vehicle encounters damages, your standard insurance policy only reimburses up to the IDV minus the depreciation value whereas applicable, whereas with a nil depreciation cover, the policy will compensate regardless of the reduced value of the vehicle parts.
  • Eligibility Age: There is no age restriction in case of buying the standard vehicle insurance. You can buy the policy irrespective of how old the vehicle is. But in case of zero depreciation cover, the policy can’t be bought if the vehicle age is more than 5 years. So, this cover is suitable for new and expensive vehicles.

Final Take Away!
Commercial vehicle insurance offers the much-needed financial protection in case of an eventuality, but yes up to a certain limit. In order to get the full value of the vehicle, you must consider zero depreciation cover. You can compare online commercial vehicle insurance with zero depreciation cover and buy as per your requirements.

Commercial Vehicle insurance articles

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