Depreciation: It’s Effect On Your Bike & Its Insurance Policy

For an owner and enthusiast, a bike is one of the most valuable things in life. This stands true both financially and emotionally. Hence, to protect it as best you can, you should buy a bike insurance policy.

A good policy will protect your bike from damages & total loss occurring due to accidents, theft, natural & man-made calamities, and even an invisible enemy known as depreciation.

Not sure what depreciation is? Well, this article will tell you all need to know about it and how it affects your bike insurance policy.


What is depreciation?

As per its simplest description, depreciation is the decrease in the monetary value of a product. This decrease happens as a result of prolonged usage. Hence, in the case of your bike, factors like ageing, wear and tear, etc. decrease its value.
In bike insurance, the rate of depreciation keeps on increasing over time. The following table should give you a better idea.

Rate of depreciation for your bike.
Age of the bike
Depreciation in %
6 months & below
5%
6 months to 1 year
15%
1-2 years
20%
2-3 years
30%
3-4 years
40%
4-5 years
50%
5+ years
IDV decided by your & insurance providers

How does it affect you?

While the depreciation rate is uniform across motorcycles, scooters, etc., in the event of an accident perhaps only a few parts will require replacement. These parts, however, will have depreciated in value. Therefore, when you make a claim, you will get compensation for part replacements based on their depreciated value. This means you won’t get the full amount and will have to pay some amount out of your own pocket.
In case of a total loss, the insurance provider will offer compensation based on the IDV of your vehicle, which is based on the current market value of your vehicle. It goes without saying that depreciation also plays an important in deciding your bike’s current market value.
This means that in case of an accident, the parts that need to be replaced will depreciate in value. Moreover, the total value IDV of your bike also experiences depreciation. 

How does my bike insurance plan safeguard me from depreciation?

Well, a normal plan won’t. This is because your basic comprehensive policy does not provide cover for depreciation. However, if you opt for the zero-depreciation add-on, you’ll get complete compensation for both part replacements and the total loss of your bike.

What is Zero Depreciation and how can it help you?

Unfortunately, your bike’s IDV is determined by the insurance company. But there are alternative ways of not letting depreciation affect your insurance coverage. One of these ways is buying a Zero Depreciation cover with your two wheeler insurance policy.

Also known as the Nil Depreciation cover, it is an add-on cover that can be bought for an extra premium amount. By doing so, you will receive compensation for your loss or damage claim without any financial deductions due to the depreciation of parts. Hope this has been helpful, good luck and ride safely. And remember, always wear a helmet!

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