Does Depreciation Affect Your Bike Insurance Premium?

Understand the Depreciation Value of Your Two-wheeler

In the insurance industry, depreciation refers to the rate by which your insurer quantifies the loss of value of an insured vehicle due to factors like wear & tear, aging, etc. This affects your Insured Declared Value (IDV), which is the maximum amount your insurer will pay out in case of a claim. Also, the older the vehicle the higher its depreciation rate.

How Will You Calculate the Insured Declared Value (IDV)?

IDV is calculated based on the current market price of your vehicle, not on the price you have paid to purchase it. The IDV value varies with time.

To get the maximum IDV, you must insure it as early as you have purchased your two-wheeler. Therefore, the older the vehicle, the lesser will be the IDV and the insurance premium. The IDV is calculated using the below formula:

(Current Market Value of the Bike - Depreciation Cost of the Bike) + (Cost of Accessories - Depreciation Cost of the Accessories) = Insured Declared Value (IDV)

How Does Depreciation Affect the Bike Insurance Premium Price?

As your two-wheeler gets older with time, the depreciation in bike insurance lowers the IDV. This means you will pay a lower premium, but you will also receive a lower payout if you make a claim, Therefore, depreciation on a bike can significantly impact the bike insurance premium amount and the final claim payout amount.

Rate of Depreciation for Your Bike

The IRDAI sets depreciation rates for different bike parts based on the age of the bike. In context to that, we have mentioned depreciation rates set by the IRDAI as per the bike's age and parts of the bike:

Rate of Depreciation According to the Age of the Bike

Rate of Depreciation According to the Bike Parts

Below we have mentioned the rate of depreciation as per the parts of the bike:

For instance, your bike meets with an accident, and tyres of the bike are damaged. In such a case, 50% of the replacement bill will be borne by your insurer and the remaining 50% will be paid by you.

However, having a zero-depreciation add-on cover in a bike will help you offset the losses from depreciation.

Depreciation and Your Bike's Resale Value

Depreciation also affects the resale value of bike. The older your bike, the lower its resale value will be. Keeping your bike in good condition and opting for a zero-dep cover can help maintain its value.

What is Zero-Dep Cover in Bike Insurance?

Zero depreciation add-on cover ininsurance for bikeis a solution to save expenses due to depreciation. By paying an extra premium, you can ensure that your insurer covers the full cost of repairs or replacements without considering depreciation. This means no surprise out-of-pocket expenses when you need to fix your bike.

Benefits of Zero-depreciation Cover in Bike

• The zero depreciation bike insurance cover is an add-on that will help you save money while paying a premium.
• You get peace of mind because claims are paid in full without calculating depreciation.
• Under this, insured parts would be reimbursed in full, resulting in no expenses from your pocket.

What is Not Covered Under Zero-depreciation Cover?

Below are some exclusions of this add-on cover:

• Under this cover, you can raise a maximum of 2 claims. However, some insurers allow unlimited claims.
• The damages to the bike parts due to regular wear and tear are not covered.
• This add-on cover is suitable for up to two years of the bike's age.
• This cover does not give benefits in case of theft, total loss, or constructive total loss.
• Your bike insurance company will accept only own-damage claims that occurred in an accident.

Who Should Buy Zero-depreciation Cover on Bike?

A zero depreciation cover in a bike is an affordable cover that saves a lot in replacement or repair costs. Also, it is ideal for all new drivers and new bike owners.

You should buy this cover if your bike is not older than 2 years. It is also recommended for those who live in an accident-prone area or have a sports bike.

How Depreciation is Calculated in Bike Insurance?

Want to know how much your bike's value has decreased over time? A depreciation in bike insurance is calculated based on the various factors, such as bike's age, make, model, and condition to estimate its current market value.

Conclusion

Depreciation is one of those factors which is an unavoidable part of owning a bike, but it doesn't have to be a burden. By understanding how it affects your 2-wheeler insurance and considering a zero-dep add-on, you can ensure that you are adequately protected and get the most out of your two-wheeler insurance.