What is Zero Depreciation Bike insurance and how it works?

Bikes are depreciating assets. Hence, when a person purchases a bike, its value depreciates over time. Depreciation plays a big role in the cover amount.A claim is approved after deducting the depreciation value.

The value of a bike depreciates every year due to factors such as age, wear and tear, etc. Also, the value depreciates if a bike meets with an accident. It causes many policyholders to pay a higher amount once a claim is approved. However, zero depreciation cover helps a policyholder as it allows zero deduction due to depreciation. Hence, the insurer pays a higher cover amount compared to a standard insurance policy.

For example, a policyholder meets with an accident. In the accident, the policyholder’s bike suffers some damages. The cost to repair the bike is Rs. 20,000. However, the insurer only offers Rs. 15,000. The insurer has deducted Rs. 5,000 by taking depreciation into account.

If the policyholder has zero depreciation cover, then the insurer will have to pay the entire amount for the repair without deducting the depreciation amount.

There is a different rate of depreciation for different parts of a bike-

Parts Percentage of depreciation
Glass and fibre 30%
Rubber, tyre, tubes, batteries, plastic 50%

For other parts, the depreciation rate as per the age is-

Bike’s Age Percentage of depreciation
Between 6 months and 1 year 5%
Between 1 year and 2 years 10%
Between 2 years and 3 years 15%
Between 3 years and 4 years 25%
Between 4 years and 5 years 35%
Between 5 years and 10 years 40%
Above 10 years 50%

If a policyholder meets with an accident, then the insurer will deduct the depreciation percentage from the claim amount. In such a case, the policyholder must pay the remaining amount in order to repair their bike. However, when a person purchases zero depreciation bike insurance , the insurer can’t deduct the depreciation amount and must pay a higher cover amount.

While standard bike insurance plans cover damage to third-party property and the policyholder’s bike, they will only offer a cover amount after deducting the depreciation. However, zero depreciation bike insurance provides better financial assistance to a policyholder as there is no reduction in the cover amount due to depreciation. However, the premium will be slightly expensive, and policyholders with older bikes can’t opt for zero depreciation cover.

The cover helps a person save a lot of money compared to standard bike policies. The repair cost can go down significantly when a policyholder has zero depreciation insurance.

Here are some differences between zero depreciation cover and regular bike insurance plans-

  • Claim Settlements

The claim settlement amount can be higher with zero depreciation cover compared to a standard bike policy. Zero depreciation cover offers a better benefit to a policyholder in the form of higher cover amount.

  • Bike’s age

While a standard insurance policy covers a bike for up to 15 years, zero depreciation plan only covers a bike for up to 2 years.

  • Premium

Zero depreciation cover is expensive compared to a regular bike insurance policy.

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