Zero dep insuranceWhen your car or any vehicle is ruined due to an accident, fire or theft, and other such factors, it is considered as Own Damage (OD). So, a motor OD insurance cover shields you against the financial cost from such events to the vehicle. The problem with the current OD covers is that every year there is depreciation on the cost of the on-road price of the vehicle. This means the value of the vehicle reduces every year and thus any claim amount is limited to the reducing value. Soon, this may change.

An IRDAI Working Group has recommended that for brand new private cars up to three years the Sum Insured in OD cover will represent the current day on-road price of the vehicle insured. This means that there will be zero depreciation as far as OD cover is concerned for the first three years. RupeeIQ gives you details.

The IRDAI Working Group has recommended that for brand new private car up to three years, the Sum Insured shall represent the current day on-road price of the vehicle insured including Invoice value, Road Tax & Registration charges and value of all accessories fitted thereon by the manufacturer. The value of accessories fitted by the Insured shall be separately mentioned.

For vehicles beyond three years, the Sum Insured shall be as per the suggested new depreciation table. Beyond 7th year, Sum Insured shall be arrived at a mutually agreed value between the Insured and the Insurer.


At the moment, as soon as a vehicle is driven out of showroom, depreciation kicks in. The depreciation is 5% for a car less than six months old. It is 15% for a car having age less than one year. Upto two years age, depreciation is 20%. This increases with age, and a car of up to five years age gets 50% depreciation. For cars more than five years old, the depreciation and insured declared value (IDV) is based on a mutual agreement between the insurer and the policyholder.

Due to the aggressive depreciation rates, at present car owners opt for zero-depreciation add-on facility by paying extra premium. This facility ensured that the insurer will pay the exact price of the car without any depreciation. If the IRDAI Working Group recommendation is accepted, then this will mean brand new private car owners will not need to buy zero depreciation facility for OD cover at least for first three years. Between the third and the fourth year of car, a depreciation of 40% will be applied (which is same as current). This will progressively increase to 60% between the sixth and the seventh year.

The Working Group also recommended that insurers can have ‘pay as you drive and pay how you drive’ covers. This will mean drivers’ behaviour and driving data will be the criteria for pricing such a product.

Similarly, a ‘named driver’ policy could be sold. So, the insurer will pay a motor Own Damage (OD) only if this named particular person was driving the vehicle at the time of claim.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at