Insurance is like a spare tyre. You may not require it, but not having one is not an option.
Insurance is like a spare tyre. You may not require it, but not having one is not an option.
  • Zero Depreciation Cover for Two Wheeler Insurance

    What Is Zero Depreciation Bike Insurance?

    With passage of time, the value of your two-wheeler goes through certain amount of reduction which is known as depreciation. In a standard insurance, any repairs or replacement of rubber, plastic, fibreglass, and other components are partially covered by the insurance provider. The rest of the deduced depreciation cost has to be borne by the vehicle owner.

    Applicable Bike Parts Rates Covers Included Covers Excluded Zero Depreciation Benefits

    Unlike land and property, a two-wheeler or a car is a depreciating asset meaning its value decreases with time. Any two-wheeler owner knows that normal wear and tear of the vehicle with time is unavoidable. Also, with rising costs, purchasing a two wheeler has become quite a costly affair. In case of damage to the vehicle due to an accident or a road mishap, the costs of repairs can also prove to be expensive. A comprehensive two wheeler insurance cover can guard you against sudden expenses related to your vehicle.

    When it comes to two wheeler insurance, most of the insurance companies offer add-on covers in addition to package and third-party covers. Insurance companies have come up with the concept of Nil Depreciation add-on cover for two-wheelers that will shield you from the depreciation factor when filing a claim. Read on to find more about how a zero depreciation cover will benefit the policyholders and its advantages.

    Applicable Rate Of Depreciation On Two-Wheeler Parts

    There are certain guidelines set by the Insurance Regulatory and Development Authority (IRDA) with respect to the depreciation to be applied on different 2-wheeler parts. These guidelines are as follows:

    Motorcycle Components Depreciation Applicable (In percentage)
    Nylon/rubber/tyres and tubes/plastic parts /batteries 50 percent
    Fiber/Glass materials 30 percent
    All other parts made of glass Nil

    For all other parts, the rate of depreciation would be as per the following criteria:

    Age Of The vehicle Applicable Rate Of Depreciation
    From 0 to 6 months NA
    From 6 months to 1 year 5 percent
    From 1 year to 2 years 10 percent
    From 2 to 3 years 15 percent
    From 3 to 4 years 25 percent
    From 4 years to 5 years 35 percent
    From 5 to 10 years 40 percent
    Above 10 years 50 percent

    Now based on the above tables, suppose you have got your bike insured with a standard motor insurance policy and the battery of your vehicle needs a replacement. After you make a claim for the same and it is duly approved, you will be required to bear the 50% cost of the replacement while your insurance provider will provide for the the remaining 50% of the cost.

    A zero depreciation add-on can be instrumental in saving significant amount of cost on replacement and repair of your bike parts. With this add-on, your insurance provider will pay the 100% cost incurred in the replacement of the battery of your vehicle. The benefit will extend to all other parts and you will have to spend almost nothing on the replacement of your bike parts.

    What does the Zero-Depreciation Cover Include?

    This add-on cover provided by most of the insurance companies offers coverage on plastic, rubber, nylon and fiberglass parts. This add-on cover can be availed for brand new vehicles and also can be opted for at the time of renewal. This zero-depreciation add-on cover is designed for bikes with a maximum age of up to 2 years and is valid for up to 2 claims during the period of the policy.

    What is not covered in a Zero-Depreciation Policy?

    The following conditions are excluded from the zero depreciation policy.

    • Damage due to an uninsured peril.
    • Damage to items that are uninsured like bi-fuel kit, tyres and gas kits.
    • Normal wear and tear.
    • Damage due to mechanical breakdown.

    The tenure of most zero-depreciation covers in the market is one year and the policyholder must renew it annually to enjoy the benefits. If you do not have a zero-depreciation cover, you can buy it along with the two-wheeler insurance or opt for it while renewing your policy.

    Conditions for availing the Zero-Depreciation Cover

    It is very important that you read the policy wordings carefully and understand the conditions associated with each cover. A zero-depreciation cover comes with the following conditions in most of the cases.

    • If the two-wheeler is completely damaged or is stolen, the zero-depreciation cover is not applicable.
    • This cover can be availed only twice during the policy term.
    • In case of damage due to an accident, the two-wheeler must be repaired in network garages that has partnered with the insurer.

    These conditions may vary based on the insurer. Do enquire with your insurance provider to know more about the terms and conditions for zero depreciation cover.

    Benefits of Zero-Depreciation Insurance Plan

    The policyholder gets the following benefits with a zero-depreciation add-on cover.

    • Since no cost of depreciation will be charged if you make a claim, you will not have to make any out-of-pocket expenses.
    • Most of your claims regarding the insured parts are settled without taking the depreciation into consideration.
    • It adds more value to the basic two-wheeler insurance cover and makes your investment on the two-wheeler almost nil.

    With this cover, you can be assured of a complete peace of mind as you will not have to burn your pockets in case of an unfortunate event. Also, with all major insurers offering this cover, you can save yourself a lot of hassles by purchasing a nil-depreciation cover and by paying a little extra premium.

    What is the difference between a Zero Depreciation Bike Insurance and a Comprehensive Insurance Policy?

    A comprehensive motor insurance policy covers the cost of damage or losses occurred to your insured vehicle as well as the damage caused to a third party in an accident. The cost of replacement of motor parts such as batteries, tyres and tubes, plastic and rubber components, fibre, nylon and glass materials are not fully provided for in a comprehensive insurance policy.

    The zero depreciation add-on cover ensures that the depreciable parts are fully covered under the policy and the policyholder does not have to pay any extra amount for the repair or replacement of the bike parts mentioned in the above tables.

    The following table shows the main differences between a Comprehensive two-wheeler insurance policy and a policy with the nil Depreciation add-on cover.

    Points Of Comparison Comprehensive Insurance Policy Zero Depreciation Add-On Cover
    Settlement of claims Claims to be covered after deduction of applicable depreciation cost Complete coverage of claims made
    coverage for cost of depreciable motor Parts Partially covered Covered fully
    Age of the vehicle Coverage up to 15 years Coverage up to 2 years
    Cost of premium Lesser than a nil/zero depreciation add-on policy 15-20% more than a comprehensive insurance policy

    Let’s try to understand the same with an example:

    Rohan and Rahul each bought a new bike. Both the bikes were of the same brand and model and costed Rs.1 lakh. While Rohan bought a comprehensive motorcycle insurance policy for his bike, Rahul also bought a zero depreciation add-on cover.

    For an instance, if both of them meet with an accident and need to get the same parts of their bikes to be replaced, they both will get a different amount covered by their insurance providers. While Rohan will have to pay the depreciated value of the bike parts from his own pocket and recover the rest from his insurance provider, Rahul will be entitled to receive the entire amount incurred in the replacement of motor parts as he opted for a zero-depreciation bike insurance policy.

    Is zero depreciation add-on useful for a bike owner?

    Although a policyholder needs to pay extra premium to avail the zero depreciation add-on cover, it can help them save significant cost on the repairs and maintenance of their bike parts. Supposingly, the insured declared value of a motorcycle is Rs.70,000. Now if you buy a comprehensive insurance policy for Rs. 1350 (assumed cost of premium), you can get a zero depreciation add-on by spending an extra amount of Rs. 250 (actual cost may vary based on multiple factors). Now if the replacement of your motor part costs you around Rs.3000-5000, you get to save a considerably high cost in comparison to the extra premium you pay for a nil depreciation cover.

    Consider the following table to understand the coverage you will receive based on the type of two-wheeler policy you have bought. Assuming the total cost of repair is Rs.5000 including replacement of various bike components, here is an example to show how the compensation will vary if you have a comprehensive 2-wheeler insurance policy or a zero-depreciation bike insurance policy.

    Motor parts to be replaced Cost of damage Rate of Depreciation Depreciation Charged
    Metal components 2,500 5 percent 125
    Plastic components 1,400 50 percent 700
    Rubber components and parts 600 50 percent 300
    Total cost of repair and replacement 5,000 - 1,125

    Difference in the Repair Cost to be born by a policyholder based on the type of policy:

    Points of Difference Comprehensive Insurance Policy Two-Wheeler Insurance with Zero depreciation Cover
    Total expenses made on repairs and replacement 4,500 4,500
    Premium Paid on insurance 1,350 1,600
    Compulsory deductible to be borne by the vehicle owner 100 100
    Depreciation cost applied 1,125 0
    Cost borne by the insurer (Total repair cost - deductibles - depreciation) 3,275 4,400
    Cost to the vehicle owner (including premium and deductibles) 2,575 1,700
    Total savings (Cost borne by the insurer - total investments made by the vehicle owner) 700 2,700

    As you can see in the above table, the premium paid on the comprehensive insurance policy is lower than that of the zero depreciation motor insurance policy. However, due to depreciation, the total cost to be borne by the vehicle owner comes to around 2,575 and they only save Rs.700 in the total repair cost. Whereas, in the zero depreciation cover where depreciation charges are not applied, the overall cost borne by the 2-wheeler owner comes down to Rs.1700, helping them save Rs.2700 on the overall repair cost.

    The above table gives a clear idea on how a zero-depreciation add-on cover for bike can help you save significant cost on the repair and replacement of your vehicle parts.

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