Does Depreciation Impact Your Two-Wheeler Insurance Premium?

What are Two-wheeler Depreciation Rates?

The depreciation rate for two-wheelers is standard. The table below shows the rate depending on the vehicle's age. This rate has a direct impact on the calculation of the insured declared value of a two-wheeler:

• Less than 6 months: 5 per cent
• Between 6 months to 1 year: 15 per cent
• Between 1 - 2 years: 20 per cent
• Between 2 - 3 years: 30 per cent
• Between 3 - 4 years: 40 per cent
• Between 4 - 5 years: 50 per cent

What is Zero Depreciation Bike Insurance?

Motor vehicles are bound to lose their value over time. Hence, it is obvious for insurance companies to take into account this depreciation cost while calculating the market value of a bike. However, if you wish to avoid this calculation and get the bike's complete value, purchasing a zero-depreciation bike insurance can be a smart choice.

Zero depreciation bike insurance, or zero dep cover, is an add-on cover. With comprehensive bike insurance, you can purchase a zero-dep add-on to enhance the coverage of your bike insurance. With this cover, the depreciation value of your bike is no longer factored into the claim settlement calculation.

Policyholders who have purchased zero depreciation bike insurance get the complete claim amount during their bike insurance claim settlement. So, with a slight increase in bike insurance premiums, you can get increased coverage and the full claim amount.

Zero Depreciation Cover and IDV

As discussed above, depreciation value impacts the insured declared value of your bike. So, to understand this, you must first understand what insured declared value is.

IDV or insured declared value is the value you receive if your insured bike sustains damage beyond repair or gets lost. So, whether due to theft, loss in a calamity, or complete loss due to an accident, if you lose your bike, the insurance company provides you with the IDV amount as compensation.

While calculating the insured declared value, the depreciation cost is deducted. The depreciation value is calculated depending on the age of your two-wheeler (as you saw in the table above). However, with zero depreciation bike insurance, the depreciation value is excluded, and you receive the exact IDV as agreed upon during policy purchase.

Note: Be sure to carefully select the IDV at the time of policy purchase to ensure the correct value of your bike.

Depreciation Rate of Bikes After 5 Years

The table above states the depreciation value of two-wheelers up to 5 years of age. So, what happens after 5 years? Usually, bikes and other motor vehicles are considered obsolete after 5 years of age and so, depreciation value is applied accordingly. At the time of policy purchase or renewal, the policyholder and the insurer agrees to a mutual depreciation rate for the bike. Accordingly, the claim settlement and IDV is adjusted.

Note: Usually, zero depreciation cover is not available for bikes older than 5 years!

Conclusion

Insured declared value is one of the essential agreements during the purchase of bike insurance. It is an agreement between the policyholder and the insurance company. So, make sure to get the right value of your bike. A higher IDV means a higher premium and vice versa. However, in case of total loss of the insured vehicle, you get the right compensation to cope with the loss.

As bikes age over time, they lose their value, and this depreciation cost is deducted from the IDV during claim settlement. If you want to waive off this calculation, you may simply purchase zero depreciation bike insurance that provides you the IDV without depreciation deductions. At Jio Insurance Broking, you can compare various options to choose the most suitable for your two-wheeler. Get your desired bike insurance today with smart add-ons, such as zero depreciation cover.