Depreciation can significantly reduce what you receive in an own-damage claim. Here is how the zero-dep add-on works, its limits, and who typically considers it.
Key takeaways
- In a standard claim, depreciation is deducted on replaced parts, so you pay part of the bill yourself.
- Zero-dep reduces or removes this deduction, subject to policy terms.
- It usually has vehicle-age limits and may cap the number of claims per year.
- It does not cover everything — compulsory deductibles and excluded items still apply.
01First, what is depreciation in a claim?
Car parts lose value with age. In a standard comprehensive policy, when parts are replaced after an accident, the insurer deducts depreciation from their cost based on the material and the vehicle's age. Parts made of rubber, plastic, nylon and fibreglass typically attract higher depreciation.
The result: even with a valid claim, you may have to pay a noticeable portion of the repair bill from your own pocket.
02What the zero-dep add-on does
The zero-depreciation (also called 'nil depreciation' or 'bumper-to-bumper') add-on reduces or removes the depreciation deduction on covered parts. In practice, this can mean a substantially higher claim settlement for the same repair.
03Limits you should know
Zero-dep is useful, but it comes with conditions that vary by insurer:
- Vehicle age limit — often available only for cars up to a certain age
- Claim count — some policies limit the number of zero-dep claims in a policy year
- Compulsory deductible still applies
- Wear and tear, mechanical breakdown and items like tyres (unless specifically covered) are usually excluded
04Who usually considers it
Zero-dep is commonly discussed by owners of new or relatively new cars, cars with expensive parts, those who drive daily in heavy traffic, and first-time drivers. For older cars, the add-on may not be available, or the cost-benefit may be different.
Disclaimer: This article is for general education only and is not financial, insurance or investment advice. Insurance is subject to policy terms and conditions. Mutual fund investments are subject to market risks; read all scheme-related documents carefully.