Zero Depreciation in Bike Insurance

Imagine you want to buy a dining table for your brand-new apartment. You plan to sell your old teak dining table that you purchased five years ago for Rs 40,000. However, now the table is worth only Rs 15,000. The value of used furniture diminishes over time due to factors such as wear and tear from everyday use. This gradual decrease in the furniture's value over time is called depreciation.

In a similar fashion, bikes also lose value over time. Whenever you request a claim, depreciation is taken into account, which lowers the total claim amount you will receive.

This means that you will incur more out-of-pocket expenses at the time of a claim. In order to avoid such costs, you can opt for a zero depreciation add-on as it does not consider depreciation when settling a claim.

So what exactly is a zero depreciation cover? What are its benefits and its exclusions? You will get answers to all of these questions in this article.

Let's get started.

So, What is a Zero Depreciation Add-On?

As soon as the bike is taken out of the showroom, its value usually diminishes. Your bike undergoes depreciation due to age, wear and tear.

Whenever you make a claim, the depreciated value of damaged parts is deducted from the claim amount. You may be required to pay depreciation charges from your own pocket.

Rate Of Depreciation Applicable On Two-Wheeler Parts

The zero depreciation add-on is an effective way to solve this problem. If you select a zero depreciation policy, your insurer will not deduct depreciation costs when calculating the claim amount, and this will result in a higher claim amount.
 

Who Should Opt For The Zero Depreciation Add-On?

If You Own A New Bike

It is wise to protect your bike with a wider coverage if you have just purchased it. It would have cost a lot to purchase this bike. Spending a bit more to protect it is certainly not an unnecessary expense. Our roads are in such poor shape that accidents have become quite common. Any significant damage to your bike will affect your finances. With this add-on, your coverage increases and as result, your out-of-pocket expenses go down.

If You Live In An Accident-Prone Area

If you live near highways or a place where accidents occur more frequently, you are at great risk. Despite following traffic rules, accidents still happen, but you can give yourself another layer of protection with this add-on.

If You Are Concerned About Minor Bumps And Dents

When your bike is your pride and joy, even a slight dent may seem like a huge deal. Hence, if you are someone who cannot tolerate even minor damage to your bike, then this add-on can prove to be valuable to you. It covers all sorts of damages.

If You Own A Luxurious Or Your Bike Has Expensive Spare Parts

Suppose you own an expensive bike. You would have spent a substantial amount of money on it, right? Just a small scratch would drain your wallet. If you opt for this add-on, the depreciation costs you incur for any sort of damage will not have to be borne by you. For example, Ravi has a BMW G310. He was on his way to a grocery store when he was struck by a speeding car. The collision damaged the exhaust and the replacement cost for the exhaust is estimated at Rs 60,000. The depreciated percentage for exhaust(made of plastic) is 50%.

Depreciated amount = 50% of 60,000 = Rs 30,000.

Without Zero Depreciation Cover, Ravi would have had to pay Rs 30,000. However, he needn’t worry about this expense since he holds a zero depreciation cover along with his standard bike insurance policy. His insurer shall cover the entire repair cost without considering the exhaust's depreciated value.
 

What Does The Zero Depreciation Add-On Not Cover?

Mechanical Failure

This add-on will not cover repair expenses incurred for mechanical failures, such as a snapped chain, suspension issue, etc. You may have to bear extra costs that arise for repairing these damages.

Wear And Tear Damage

If there is no significant damage other than minor damage due to everyday use, then this add-on will not provide coverage

Vehicles Older Than 2 Years

This add-on does not cover vehicles older than 2 years. However, some insurers like Iffco Tokio, Edelweiss, Go Digit, etc., offer zero Depreciation for vehicles older than 2 years as well.

There Is A Limit On The Number Of Claims

Under this add-on, you can only submit two claims during the policy period. Hence, make sure you don't file unnecessary claims. For instance, raising a claim for a minor dent or bump seems pointless.

Lets's Compare A Standard Bike IKnsuarnce Policy With And Without The Zero-Depriciation Add-On

Let's Understand How The Zero Depriciation Add-On Works With

Lalith has a Comprehensive Insurance Policy with an IDV of Rs 2 lakhs for his bike. On his way to work, a car collided with his bike. His bike sustained severe damage. The accident damaged the bike's headlights, indicator, side fairings, and panels. The repair cost for the headlight is estimated to be around Rs. 5000 and approximately Rs. 8,000 for the side fairings and panels.

Let's look at the claim payable to Lalith if he owns a Zero Depreciation add-on and the claim payable if he doesn’t.

Depreciation amount for Side fairings and panels (made of fibre) = 30% of 8,000 = Rs 2400

Depreciation amount for hood and tail lights (made of plastic) = 50% of 2500 = Rs 2500

Note: Consumables and deductibles are not included in this example for understanding purposes.

Now that you are aware of the Zero Depreciation add-on and its benefits, we are sure that you can go ahead and decide whether or not to purchase it. Please remember that adding this cover to your existing policy draws an additional premium.