File a car insurance claim and the payout rarely matches the repair bill. Insurers deduct depreciation on every part they replace, based on what the part is made of and how old your car is. A NIL depreciation add-on removes that deduction and pays the full cost of the part. What most buyers miss is that the add-on has a ceiling of its own. You can only use it a fixed number of times in a policy year. That ceiling is the NIL depreciation claim limit.
How Depreciation is Calculated
The rates come from GR.9 of the erstwhile India Motor Tariff. Motor premiums were de-tariffed years ago, but insurers carried these rates into their standard policy wordings, and the regulator has amended parts of it since.
Material comes first, then age. Rubber, nylon and plastic parts, along with tyres, tubes, batteries and airbags, take a flat 50% deduction. Fibreglass takes 30%. Glass takes nothing. Everything else, mainly metal and wooden parts, follows an age slab:
| Age of the vehicle | Depreciation on parts |
| Up to 6 months | NIL |
| 6 months to 1 year | 5% |
| 1 to 2 years | 10% |
| 2 to 3 years | 15% |
| 3 to 4 years | 25% |
| 4 to 5 years | 35% |
| 5 to 10 years | 40% |
| Over 10 years | 50% |
Painting is treated separately. The 50% cut applies only to the material cost of the job, and where the garage raises a consolidated bill, the material component is taken as 25% of the total painting charge.
So a ₹15,000 plastic bumper on a three-year-old car settles at roughly ₹7,500, because the flat 50% applies from day one. A dented metal bonnet on the same car loses only 15%. You pay the gap in both cases. Most people buying car insurance online compare premiums and discover this only at claim stage.
What the Add-on Covers, and What it Does Not
NIL depreciation cover, also sold as zero depreciation or bumper-to-bumper, pays the full cost of replaced parts with no deduction for wear and tear. It is not a free claim. The compulsory deductible still applies, currently ₹1,000 for cars up to 1500cc and ₹2,000 above that. Consumables such as engine oil, coolant and lubricants sit outside it unless you buy a separate consumables cover, and most insurers restrict or exclude tyres, tubes and batteries. It does not apply to total loss, constructive total loss or theft, where settlement runs on IDV.
The extra premium usually works out to 15% to 20% of your own-damage premium, and runs higher on older or high-value vehicles.
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What the Claim Limit Actually Means
The limit is the number of times you can invoke the add-on during one policy period. For own damage that period is always 12 months, even on a new car where the third-party portion is bundled for three years under the structure mandated from September 2018.
Two claims per policy year is the common cap in India. A few insurers allow only one. Some, mostly digital-first players, sell unlimited claims at a higher premium.
Use it twice and your third claim goes through on standard terms, with depreciation deducted as usual. You do not lose cover. You lose the full-replacement benefit. Your base own-damage and third-party sections stay active regardless. And every one of these claims, capped or not, resets your No Claim Bonus at renewal.
Why Insurers Impose the Cap
Insurance runs on pooled risk. NIL depreciation shifts a cost that would normally sit with you onto the insurer, which raises the exposure on every claim. One policyholder filing several small claims can easily cost more than the premium collected.
Think about a car in Mumbai or Bengaluru traffic. Scratches, dents and minor knocks are routine. Pay full part replacement on all of them and the loss ratio stops working. The cap keeps the product priced for the wider pool.
There is also a moral hazard. When repairs cost nothing, small damage gets claimed instead of absorbed. The cap discourages that.
It Applies Only to Own Damage
NIL depreciation is an own-damage feature. Third party car insurance covers your legal liability for injuring someone or damaging their property, and has nothing to do with repairing your own vehicle. The add-on and its limit therefore sit entirely inside the own-damage section of your policy.
A standalone third-party policy, the legal minimum under the Motor Vehicles Act 1988, cannot carry this add-on. You need own-damage protection, either inside a comprehensive policy or as a standalone own-damage policy, which insurers have been allowed to sell since September 2019.
Who Should Pay Attention to the Limit
New cars, and anything with expensive imported parts, benefit most. On a car under two years old, most of the saving comes from plastic and rubber components, which lose 50% from the first day. A bumper, a headlamp cluster and a paint job can leave you ₹10,000 to ₹15,000 short on an otherwise ordinary claim. On a luxury car, a single headlamp assembly can cost more than a small hatchback’s entire repair bill.
Check the limit before you buy. Two claims against unlimited is a real difference if you commute daily through heavy traffic. Also check how the insurer counts a claim. Some tick the counter only when depreciation would actually have applied, others count every claim. This varies, and the policy wording decides it.
Age Limits and Renewal
Most insurers offer NIL depreciation on cars up to five years old. Several extend it to seven, and a handful cover vehicles up to ten, usually with a higher premium, a mandatory pre-inspection, or a partial waiver rather than a full one. IRDAI does not fix an upper age limit, so eligibility is a commercial decision by each insurer.
The reasoning is simple. Older cars attract steeper depreciation on metal parts, which makes full replacement expensive to price competitively.
At renewal, check whether you still qualify. Losing eligibility pushes your out-of-pocket cost up sharply, and planning for it beats finding out mid-claim. The cap itself is not stingy. It is what keeps the add-on affordable. Knowing your limit lets you spend it on a serious repair rather than a car park scuff.
