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Assessment · Depreciation

Zero-depreciation (nil-dep): how it really works on the assessment

Every surveyor knows depreciation reduces a claim. A nil-dep policy does not remove that calculation — it changes what happens to it at the last step. Here is the part-by-part logic, and a worked example showing exactly how the reimbursement appears on the final sheet.

For licensed surveyorsIndia · Motor OD~7 min read

In short

  • Depreciation is applied to the value of replaced parts, not to labour — labour is paid in full.
  • The rate depends on the material of the part and the age of the vehicle; rubber, plastic and nylon parts carry a fixed higher rate.
  • On an ordinary policy the computed depreciation is deducted from the claim.
  • On a nil-dep policy the same figure is still computed, then added back / reimbursed — so it must be shown clearly, not simply hidden.
  • Nil-dep does not waive the compulsory excess, salvage, or non-admissible items.

What depreciation actually is

A motor own-damage claim indemnifies the insured for loss — it puts them back roughly where they were, not in a better position. When a three-year-old bumper is replaced with a brand-new one, the insured gains a little: an old part is swapped for new. Depreciation is the adjustment for that gain. It is charged on the price of the replaced part, so a part that is repaired rather than replaced carries no part-depreciation at all, and labour is never depreciated.

How the rate is decided

Two things set the depreciation percentage on a part: what the part is made of, and how old the vehicle is.

Material-fixed parts

Rubber, nylon, plastic parts, tyres and tubes, and batteries carry standard fixed rates regardless of a long age table — for example a flat rate on rubber/plastic and a separate rate on tyres and batteries. Glass is typically taken at nil depreciation.

Metal & general parts

Painted sheet-metal and general parts follow an age slab that rises with the vehicle's age — nil in the first few months, then stepping up year by year to a ceiling for older vehicles.

Paint has its own treatment: on a repair, depreciation is applied to the material component of the painting charge, so the paint material is depreciated while the painting labour is not.

Illustrative age slab (for teaching only): a common pattern is nil for the first six months, then a small single-digit percentage in the first year rising step by step toward a higher ceiling for vehicles several years old. Always apply the actual slab in the operative policy and the prevailing tariff — the numbers here are only to show the shape of the calculation.

Worked example — ordinary policy

Take a simple claim with illustrative figures:

  • Front bumper (plastic) — part price ₹ 6,000, depreciation @ 30% = ₹ 1,800
  • Bonnet (metal) — part price ₹ 9,000, depreciation @ 10% = ₹ 900
  • Labour (replacement + fitting) — ₹ 2,500, no depreciation
  • Paint material — ₹ 2,000, depreciation @ 50% on material = ₹ 1,000

Parts + paint material = ₹ 17,000; total depreciation = ₹ 3,700. On an ordinary policy that ₹ 3,700 is deducted. The assessed amount before excess is ₹ 17,000 − ₹ 3,700 + ₹ 2,500 labour = ₹ 15,800, then the compulsory excess and any salvage come off.

The same claim — nil-dep policy

Under a zero-depreciation policy the surveyor still computes that ₹ 3,700 exactly as above — the figure must be visible on the sheet for transparency. The difference is the final move: instead of deducting it, the sheet adds it back as reimbursed.

Ordinary

Parts & paint ₹ 17,000 − depreciation ₹ 3,700 + labour ₹ 2,500 = ₹ 15,800 (before excess & salvage).

Nil-dep

Same ₹ 3,700 computed, then added back as reimbursed → parts allowed at full ₹ 17,000 + labour ₹ 2,500 = ₹ 19,500 (before excess & salvage).

The ₹ 3,700 is the value of the nil-dep add-on to this insured on this claim. That is why a good assessment sheet never simply suppresses depreciation on a nil-dep claim — it shows the computed amount and then an explicit “Add back: depreciation — reimbursed under nil-dep” line, so the insurer, the insured and any auditor can all see the logic.

How DigiSurvey shows it: on a nil-dep policy the assessment sheet keeps the part-wise depreciation visible, carries the parts total at full value, and prints a clear add-back line stating the policy is nil / zero-depreciation and the depreciation is reimbursed, not deducted. The same treatment flows into the final, summary and NIA-format reports.

What nil-dep does NOT remove

This is where disputes arise, so be explicit in the report:

  • Compulsory excess / deductible — still applies and is still deducted.
  • Salvage — the value of replaced damaged parts (where retained by the insured) is still accounted for.
  • Non-admissible items — wear-and-tear parts, pre-existing damage and consumables not related to the accident stay out of the claim.
  • Betterment beyond the add-on — nil-dep covers depreciation on parts; it does not turn an inadmissible repair into an admissible one.
Common trap: treating “zero-dep” as “pay the full garage bill”. The deprecation deduction is waived; the admissibility test, excess and salvage are not. Keep each on its own line.

Frequently asked questions

What is a zero-depreciation (nil-dep) motor policy?
It is an add-on to the own-damage cover under which the insurer does not deduct depreciation on the value of replaced parts. The surveyor still computes the depreciation part by part, but under nil-dep the amount is reimbursed rather than deducted, so the insured receives a higher net payable.
Is depreciation still calculated on a zero-dep claim?
Yes. It is computed part by part exactly as on an ordinary claim, because the figure must be shown transparently. On a nil-dep policy the computed depreciation is then added back as reimbursed instead of being deducted from the net payable.
Is labour ever depreciated?
No. Depreciation applies only to the value of replaced parts and to the material component of paint. Labour for removal, refitting and painting is paid in full on both ordinary and nil-dep claims.
Does zero-depreciation mean the full bill is paid?
No. Zero-dep removes the depreciation deduction on parts, but the compulsory excess, any policy deductible, salvage value of replaced parts, and non-admissible or betterment items still apply.

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