How Depreciation Impacts Two Wheeler Insurance Premium

Written by Sharad Bajaj

Updated On Apr 15, 20212 min read

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).

How Depreciation Impacts Two Wheeler Insurance Premium

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 Depreciation Without Zero Depreciation Cover	Rate of Depreciation With 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 Depreciation Without Zero Depreciation Cover	Rate of Depreciation With 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%

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.

Written by Sharad Bajaj

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Sharad is an insurance industry veteran who has managed motor insurance products for over a decade. He helped set up and scale the motor insurance vertical for a leading insurance company in his previous stint. In his spare time, Sharad likes to read and be in tune with nature.