A two-wheeler is a depreciating asset. As the bike ages, it goes through wear and tear, and its market price decreases. Hence, when you purchase a two-wheeler insurance policy, the insurer takes into consideration the age of the bike to determine its IDV (Insured Declared Value ).
Most insurers offer a zero depreciation add-on cover to ensure that you get complete coverage on your bike regardless of the depreciation costs. In this article, we will talk about depreciation and how it can impact your Bike Insurance premium.
How is Depreciation Determined in Bike Insurance?
Depreciation of a two-wheeler is directly proportional to its age. Typically, the value of a vehicle starts depreciating as soon as it leaves the showroom. Here is a table to help you understand the correlation between age and depreciation rates:
|Age of the two-wheeler
|Rate of depreciation
|Below 6 months
|Between 6 months to a year
|Between 1 & 2 years
|Between 2 & 3 years
|Between 3 & 4 years
|Between 4 & 5 years
|Between 5 &10 years
|More than 10 years
Importance of Understanding Depreciation
When you compare two wheeler insurance and purchase the best bike insurance policy, the sum insured is equal to its Insured Declared Value (IDV). This is the current market price of the vehicle. The insurer determines the IDV using a range of factors like its make & model, age, and depreciation of different parts.
If your bike is old, then its parts depreciate due to wear and tear. Hence, the IDV of the bike insurance policy decreases along with its premium. Hence, the relationship between the IDV and depreciation is inverse in nature. This means that as your bike’s age increases, its IDV decreases. So, if you have a bike that is between three and four years old, then the insurer will use a depreciation rate of 25% while calculating the claim amount. One of the best ways to counter the impact of depreciation is to opt for a Zero Depreciation add-on cover.
Understanding Zero Depreciation Cover
Most insurers offer add-ons on comprehensive two-wheeler insurance policies to help you get maximum coverage. A zero depreciation cover ensures that the IDV is not impacted by the age of the two-wheeler. Hence, if your bike is stolen or meets with an accident that results in a total loss, then the insurer reimburses an amount that is close to the market value of the vehicle.
Even in the case of repairs or replacement of parts, the insurer considers the rate of depreciation before offering reimbursement. However, with zero depreciation bike insurance, the depreciation is not considered, and you get a higher claim amount. If you own a high-end bike, then the expense of repairs and replacement of parts can be high. With a zero depreciation cover for bikes, you can be assured of not having to spend a considerable sum on repairs or replacement of parts.
You can opt for this add-on while you buy bike insurance online or when you are opting for a two-wheeler insurance renewal online. Make sure that you compare plans and features and choose the best online two-wheeler policy based on your needs.
Remember, a comprehensive bike insurance policy is designed to offer financial protection against damage caused because of a range of reasons to you, your bike, or a third-party person or property. However, being prone to wear and tear, the insurer tries to calculate the current market value of your bike for honouring claims.
This is where depreciation is considered. From the table depicted above, one can see that the depreciation rates in bike insurance can put a lot of financial burden on you, especially if you own a high-end bike. Hence, it is prudent to opt for a zero depreciation bike insurance cover as it allows you to get the maximum reimbursement by paying a nominal amount as a premium for the cover.