How Depreciation Impacts Two Wheeler Insurance Premium
What is depreciation? What does depreciation affect? How depreciation affects your two wheeler insurance? In this article we will explain exactly how this works.
When purchasing bike insurance for your two-wheeler it is always advised to compare the various aspects of the insurance policy to find the one best suited to you. One factor that greatly affects the bike insurance premium is the depreciation rate that is calculated according to the Insured Declared Value (IDV).
Also Read: Bike Insurance Details by Registration Number
In this article we will explain exactly how this works, so you can make the best choice for yourself when choosing a policy:
What is Insured Declared Value (IDV)?
Insured Declared Value is the maximum the insurer will compensate the policyholder for the damages to their two-wheeler in case of an accident. The IDV is determined not by the cost of the vehicle but by its market value. This means that it the IDV of a two-wheeler depreciates every year, i.e., the value decreases every year. In other words, the depreciation rate determines the amount that the insurer will compensate in case of a mishap.
Also Read: Fine for Driving Two Wheeler Without Insurance
How Does Depreciation Rate Affect the IDV and the Premium?
As your two-wheeler gets older the rate of depreciation makes the Insured Declared Value (IDV) lower. This in turn affects the premium of the insurance policy. Thus, as your bike gets older you will have to pay a lower premium each year, but this also means that you will get an equally low compensation in case of a mishap.
Insure Your Bike Against Depreciation With Zero Depreciation Cover
The only way to avoid the depreciation rate is to purchase a zero depreciation cover, which is available as an add-on with standalone own-damage and comprehensive bike insurance plans. This add-on helps you get rid of the depreciation incurred by your bike and its various parts.
Depreciation Rate Applicable on Bike With and Without Zero Depreciation Cover
Age of Bike |
Rate of DepreciationWithout Zero Depreciation Cover |
Rate of DepreciationWith Zero Depreciation Cover |
|
Under 6 months |
0% |
0% |
|
6 months to 1 year |
5% |
0% |
|
1-2 years |
10% |
0% |
|
2-3 years |
15% |
0% |
|
3-4 years |
25% |
0% |
|
4-5 years |
35% |
0% |
|
5-10 years |
40% |
0% |
|
Above 10 years |
50% |
0% |
Bike Part |
Rate of DepreciationWithout Zero Depreciation Cover |
Rate of DepreciationWith Zero Depreciation Cover |
|
Parts made of glass |
100% |
0% |
|
Rubber/nylon/plastic parts, tyres and tubes, batteries, paint work and airbags |
100% |
50% |
|
Parts made of fiber glass |
100% |
30% |
Also Read
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Benefits of Buying Long-Term Two Wheeler Insurance
Conclusion
In nutshell, the depreciation rate affects the Insured declared value(IDV) of the bike. This means that the IDV becomes lower with every passing year, lowering the premium but also the maximum limit of compensation. To prevent this, however, you can purchase a Zero Depreciation Cover. It adds to your premium, but this way your compensation amount is not affected by the depreciation.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
