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Understanding Nil Depreciation in Car Insurance

Detailed explanation of nil depreciation coverage in car insurance including benefits terms and important considerations for policy selection.

  • 07 Feb 2025
  • 4 min read
  • 184 views

A vehicle may encounter an accident at any time on the road. This is why different types of vehicle insurance coverage, such as comprehensive car insurance with and without nil depreciation cover and third-party insurance, are available.

Car insurance minimises the financial burden of unplanned liabilities. It helps you pay the repair bills for the damages caused by an accident. In the case of an accident that causes a driver's death, insurance coverage also provides financial benefits to the deceased person's survivors.

So, getting vehicle or car insurance with nil or zero depreciation cover is a wise decision.

Let us understand the nil depreciation meaning and the benefits this coverage in detail.

What does Nil Depreciation mean?

Zero or nil depreciation in car insurance refers to an add-on that removes depreciation costs during claims so that the claimant gets full coverage for the damage. This is also called bumper-to-bumper depreciation cover.

In other words, if you have zero depreciation coverage, the insurer has to give a total of 100% payout for coverage during claim settlement. The claims settlement process does not account for the spare parts' depreciation value. In this way, this coverage offers stress-free insurance for your vehicle components, as the insurer will make an entire payment when needed.

This insurance add-on can save a considerable amount for car owners who have met an accident. This add-on is available at a nominal premium in the comprehensive car insurance policy.

Zero depreciation cover applies to vehicles five years old or less. Additionally, the policyholder can avail of the cover benefit only twice during the policy. Buying zero depreciation car insurance cover is advisable if you have recently purchased a new car or are a new driver.

Please note that the depreciation amount for vehicle wear and tear is calculated according to the depreciation rates decided by IRDAI. Also, if a car makes an accident that damages it fully, a zero depreciation add-on will not be applicable in settling the claim. Only the vehicle's current market value is considered for settling the claim of a damaged car.

If the driver is driving under the influence of alcohol or intoxicating substances, the claim toward the repair bill for the car damage will be dishonoured. Additionally, driving without a driver's licence waves the claim against zero depreciation insurance.

The Benefits of Nil Depreciation Add-on Cover

Now the nil depreciation cover meaning is clear, let us check its benefits. The advantages of having nil depreciation add-on cover are as  follows:

  • Greater peace of mind for new car drivers
  • A nil depreciation cover means you can reduce out-of-your-pocket expenses for repairing a car that meets an accident.
  • It is beneficial if your car's spare parts are expensive (usually luxury cars)
  • If you drive in accident-prone areas, this add-on is beneficial.
  • It offers policyholders complete protection against financial burden or loss by compensating the repair or replacement amount for car damage.
  • With zero depreciation cover for your car, you can always get minor damages repaired to keep your vehicle in a new condition
  • This add-on is specifically beneficial if your car does not have a dedicated parking space, which increases the chances of damage. You can get the full cost of repairs and replacement of damaged parts in your insurance claims, as your claim amount would increase.

 


Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.

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