Zero Depreciation Cover

Zero depreciation cover (also called 'bumper-to-bumper' or 'nil-depreciation' add-on) is an optional rider on motor own-damage insurance that waives the standard depreciation deduction the insurer applies to replaced parts during a partial-loss claim. Without zero depreciation, the standard motor depreciation grid applies — 0% on glass, 30% on fibre, plastic, and rubber components, 50% on most metallic components, with the depreciation calculated on the replacement-part cost. The rider zeroes out these deductions, so the claim payout reflects the full new-part cost (less only the standard policy deductible and any non-admissible items).

Indian insurers offer zero depreciation as a standard add-on, typically priced at 15% to 25% of the own-damage premium, and it is usually available for cars up to five years old (some insurers extend to seven years for select models). The number of times zero depreciation can be invoked in a policy year is sometimes capped — commonly two to four claims, depending on the insurer. Worked example: Neha owns a two-year-old hatchback with an IDV of ₹6.

5 lakh. She has a base comprehensive policy with an annual OD premium of ₹6,800. Adding zero depreciation costs an extra ₹1,400 a year, taking the OD premium to ₹8,200.

After a parking-lot collision, the repair bill is ₹78,000, of which ₹52,000 is plastic and rubber parts (bumper, headlamp cluster, tail lamp) and ₹26,000 is labour. Under standard depreciation, the insurer would deduct 30% on parts (₹15,600) plus the ₹1,000 deductible, paying ₹61,400. Under zero depreciation, the insurer pays ₹77,000 (full ₹78,000 minus the ₹1,000 deductible).

The ₹15,600 saved on this single claim more than recovers the ₹1,400 premium uplift across multiple years. A common misconception is that 'zero depreciation means zero out of pocket'. It does not.

The standard policy deductible (₹500 to ₹2,500 typically), labour escalation beyond the workshop's tariff agreement, consumables not covered, and any inadmissible items still come from the policyholder's pocket. The rider zeroes only the depreciation grid, not all out-of-pocket exposure. Another common misconception is that zero depreciation is worth adding for older cars.

After five to seven years, the cost of new parts begins to fall as the vehicle's IDV drops, the rider premium becomes a meaningful share of the OD premium, and the savings per claim shrink. The economic case for the rider is strongest for cars in their first five years and weakens thereafter. Related: own-damage, idv, comprehensive-insurance.