As the market value of your two-wheeler depreciates, it also affects the premiums you pay for bike insurance. Read this post to know more.
The value of every vehicle depreciates with time. This is why the resale value of a two-wheeler purchased a few months ago is lower than its purchase price. But apart from the resale value, depreciation also impacts two-wheeler insurance premiums.
Let’s take a look at how depreciation affects bike insurance premiums and what can be done about it-
What is Two-Wheeler Depreciation?
Depreciation can be defined as the rate by which the value of a two-wheeler falls due to ageing. It depends on the Insured Declared Value (IDV) and the resale value of the vehicle. As a result, IDV varies based on the make and model of your bike. Older vehicles have higher depreciation rates and lower IDVs.
As the IDV of a two-wheeler falls, so does the bike insurance coverage. As the coverage falls, it also reduces the premium you pay for two-wheeler insurance. So, the IDV and insurance premium of an older two-wheeler is generally lower than a similar new two-wheeler purchased recently.
How is the Depreciation Rate of a Two-Wheeler Decided?
As depreciation is a vital component in vehicle insurance, the Insurance Regulatory and Development Authority of India (IRDAI) has released depreciation guidelines for two-wheeler insurance plans. Take a look-
Depreciation Rate for Two-Wheeler Parts
The depreciation rate for the parts can be different based on the parts involved. For instance, the depreciation rate for batteries, tires, rubber, plastic or nylon parts is 50%. The same for fibreglass is 30%. However, there is 0% depreciation for glass parts.
Depreciation Rate for All Other Parts (Including Wooden Parts)
| Two-Wheeler Age | Depreciation % |
| Up to 6 months | 0% |
| 6 months to 1 year | 5% |
| 1 year to 2 years | 10% |
| 2 years to 3 years | 15% |
| 3 years to 4 years | 25% |
| 4 years to 5 years | 35% |
| 5 years to 10 years | 40% |
| Older than 10 years | 50% |
Depreciation Rate to Calculate IDV
| Two-Wheeler Age | Depreciation % |
| Up to 6 months | 5% |
| 6 months to 1 year | 15% |
| 1 year to 2 years | 20% |
| 2 years to 3 years | 30% |
| 3 years to 4 years | 40% |
| 4 years to 5 years | 50% |
| 5 years and above | Based on the understanding between the insurer and the insured |
How Can a Depreciation Protect or Zero Depreciation Add-on Help?
Add-ons help expand the scope of your bike insurance policy. For instance, with the Depreciation Protect add-on, you’ll have zero depreciation cover, allowing you to claim the total replacement cost of bike parts in case of an accident. So, the insurer will not deduct depreciation value from the claim amount, helping you save a considerable amount of money.
But as the Depreciation Protect is an add-on, you’ll have to pay a slightly higher bike insurance renewal or purchase premium to include this add-on to your insurance policy. Moreover, the add-on is generally only available for up to a certain period.
Get Added Financial Protection Against Depreciation with Depreciation Protect Add-on
Depreciation reduces the value and IDV of your two-wheeler. In case of an accident, when the policyholder files a claim, the insurer will deduct the depreciation value before paying the claim amount. But with a Depreciation Protect add-on, you can receive the entire claim amount without the insurer deducting depreciation.
If you’re looking for two-wheeler insurance renewal, then consider purchasing the Depreciation Protect add-on with the policy, as it offers added financial protection and peace of mind.
