How Does Depreciation Impact on Your Two-Wheeler Insurance Policy?

When you own a two-wheeler, its registration, PUC, and insurance are three things that you need to comply with. While the registration of your vehicle is looked after by the dealer, its insurance is something that is optional to buy from the dealer, i.e., you can either opt for a policy that your dealer offers or purchase one yourself. But buying one is mandatory. The Motor Vehicles Act of 1988 lays down this requirement and non-compliance attracts fines.

When it comes to selecting a two wheeler insurance plan, there are a plethora of alternatives to choose from. Many buyers place emphasis on the premium of the plan to decide which policy to select. However, that shouldn’t be the only thing to consider. Different factors impact the premium and hence, price shouldn’t be the sole determinant of the insurance cover. Thus, understanding the policy is critical to making a choice of an insurance policy. One such term that you need to know before finalizing a policy is depreciation.

What is depreciation in two-wheeler insurance?

Depreciation is the reduction in the value of an asset over time. It occurs irrespective of being in use or not. While it is commonly heard about for parts and machinery, vehicles are also subjected to the same. When your ride your bike, the components undergo routine wear and tear impacting its value.

How does depreciation impact the two-wheeler insurance?

Depreciation has a negative effect by reducing the compensation paid by your bike insurance policy. It is because, with the passage of time, the internal components lose their value, and thus, the repair costs for them are compensated in proportion.

While understanding depreciation and its impact on the two-wheeler insurance plan, there is one more factor that you need to understand which is IDV or insured declared value. It is the approximate value of your vehicle which the insurer compensates in the event of complete damage. The IDV is calculated for your vehicle based on the following table prescribed by the regulator.

Age of the two-wheeler Depreciation rates for calculating IDV
Not greater than 6 months 5%
Greater 6 months but not greater than 1 year 15%
Greater 1 year but not greater than 2 years 20%
Greater 2 years but not greater than 3 years 30%
Greater 3 years but not greater than 4 years 40%
Greater 4 years but not greater than 5 years 50%

* Standard T&C Apply

If your bike is more than 5 years of age or has been discontinued production by the manufacturer, its IDV is determined between you and the insurance company mutually.

Can you include coverage for depreciation in your two-wheeler insurance policy?

Yes, depreciation can be covered in a two-wheeler insurance plan by choosing a zero-depreciation cover in your comprehensive bike insurance policy. Since it is an add-on that is available to buy when you select a comprehensive plan, it does impact the two wheeler insurance price. Using such an add-on, you can ensure the compensation is available even for the depreciation element that otherwise would be required to be paid from your own pocket. * Standard T&C Apply

In conclusion, depreciation lowers the amount of pay-out an insurance policy has to offer but can be overcome using an add-on facility. While depreciation is one limitation that add-ons cover, other enhancements in bike insurance coverage can also be made and a two wheeler insurance premium calculator is a handy way to know about its impact. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.

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