Updated on - 02 Jan 2026
Maintaining a car can be challenging, especially with rising on-road risks. A nil depreciation cover helps ease this burden by ensuring you receive the full claim amount without deductions for depreciation if your vehicle is damaged in an accident. The cover is particularly valuable for new or high-value cars, where even minor repairs can be expensive.
This blog explains what a nil depreciation cover is and why it is a smart addition to your car insurance policy.
What does nil depreciation mean?
Zero or nil depreciation in car insurance refers to an add-on that eliminates depreciation costs during claims, ensuring you receive full coverage for the damage.
In other words, if you have zero depreciation coverage, he insurer pays the full cost of repairs.
Zero depreciation cover is generally available for cars up to five years old or less. Many insurers also limit the number of nil depreciation claims you can file in a policy year.
It is especially advisable to opt for a zero depreciation cover if you have a new car, a high-value vehicle or if you are a new or less-experienced driver, as it helps reduce out-of-pocket repair costs after an accident.
The benefits of nil depreciation add-on cover
Here are the advantages of having nil depreciation add-on cover:
- Lower out-of-pocket expenses: It covers the depreciation on parts, reducing the amount you need to pay during repairs after an accident.
- Better protection in high-risk areas: Ideal for vehicles frequently driven in heavy traffic or accident-prone zones.
- Reduced financial burden: By covering the full repair or replacement cost of parts (without depreciation deductions), it offers stronger financial protection.
Difference between comprehensive and nil depreciation car insurance
While both comprehensive insurance and nil depreciation cover offer valuable protection, they differ in their purpose and the extent of coverage they provide:
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Feature
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Comprehensive car insurance
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Nil depreciation car insurance
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Coverage
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Covers damage to your car in an accident, third-party liability, theft and natural disasters
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claims are settled without factoring in depreciation on parts
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Depreciation
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Deducted during claim settlement
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Not deducted; you get the full cost of the replaced parts
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Claim amount
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Lower, as depreciation is subtracted
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Higher, since the full cost of repair is reimbursed
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Premium
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Lower
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Slightly higher due to added coverage
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Best for
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All cars
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New cars, luxury cars or frequently driven vehicles
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Out-of-pocket expenses
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You pay for the depreciated value of parts
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Minimal, as most repair costs are covered
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How nil depreciation impacts claim settlement
A nil depreciation cover significantly changes the way your car insurance claim is settled. With this add-on, the insurer pays the full cost of repairing or replacing damaged parts without deducting depreciation.
As a result, you receive a higher claim amount compared to a standard comprehensive policy, where the insurer subtracts the depreciated value of parts due to wear and tear.
This helps reduce out-of-pocket expenses, especially for frequently replaced parts like bumpers, fibre components and metal panels, easing the financial burden after an accident.
Things not covered under nil depreciation policy
A nil depreciation policy offers wide coverage, but it does not include every possible scenario or incident, such as:
- Damages from everyday wear and tear, rust, mechanical and electrical failures.
- Consumables such as oil, nuts, bolts and coolant, unless you’ve opted for a separate consumables add-on.
- Engine damage caused by water entry or oil leakage, unless you have an engine protection add-on.
- If the vehicle was used illegally or if the driver didn’t have a valid licence.
- Indirect losses, such as income lost while the car is under repair,
Remember, you’ll still need to pay the compulsory deductible at claim time.
Conclusion
Understanding how a zero depreciation car insurance works helps you make an informed decision when choosing the right coverage. This add-on offers greater peace of mind by reducing unexpected repair expenses and ensuring you receive maximum claim value.
While a nil depreciation cover enhances protection, a comprehensive car insurance policy remains essential as it provides broad financial security against accidents, theft and other unforeseen events.
If you need personalised guidance in selecting the right car insurance plan, you can fill out the form on this page to receive tailored assistance.
FAQs
1. Can I get zero depreciation car insurance for an older vehicle?
Most insurers offer zero depreciation cover for cars up to 5 years old. However, this limit can vary; some insurers may extend eligibility to 7 years or more with an additional inspection or higher premium.
2. How does zero depreciation car insurance affect my premium?
The premium is slightly higher, but it’s often worth it considering the higher claim payout and minimal personal expense during repairs.
3. Is zero depreciation car insurance applicable for total loss or theft?No, it applies
only to repair-related claims. In cases of total loss or theft, compensation is based on your car’s Insured Declared Value (IDV), not the nil depreciation benefit.
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.