Thursday, May 4, 2023

What is Depreciation in Bike Insurance?

When it comes to protecting your bike, a comprehensive bike insurance policy is essential. However, many bike owners may not be familiar with the concept of depreciation in bike insurance. In this article, we will explain what depreciation means in bike insurance and how it impacts your two-wheeler insurance policy.

What is Depreciation in Bike Insurance?


What is Depreciation in Bike Insurance?

Depreciation refers to the decrease in the value of your bike over time. It is a standard practice for insurers to take into account the depreciation of your bike when calculating the claim amount in case of theft, damage or total loss. This is because your bike's value decreases with time due to wear and tear, aging, and other factors.

The insurance company considers the age of your bike and its current market value to determine its depreciation rate. The older your bike, the higher its depreciation rate will be. The depreciation rate varies from one insurer to another and can range from 5% to 50%.

How Does Depreciation Affect Your Bike Insurance Policy?

Depreciation affects your bike insurance policy in several ways. Let's take a look at them below:

1. Claim Settlement

In case of theft or total loss of your bike, the insurance company will consider the depreciation value while settling your claim. The insurer will deduct the depreciation value from the bike's market value to arrive at the claim amount. For instance, if your bike is three years old, and its market value is Rs. 80,000, and the depreciation rate is 20%, the insurer will settle the claim at Rs. 64,000 (80,000 - (20% of 80,000)).

2. Premium

The depreciation value also affects your bike insurance premium. Since the insurer considers the depreciation value while settling the claim, the premium for an older bike with a higher depreciation rate will be lower than a newer bike with a lower depreciation rate.

3. Renewal

At the time of renewal, the insurer will consider the current market value of your bike and its age to calculate the depreciation rate. If your bike has depreciated significantly, the premium will be lower than the previous year. However, if the market value of your bike has increased, the premium will also increase.

4. Add-on Covers

Depreciation also affects the add-on covers you choose for your bike insurance policy. For instance, if you have opted for an engine protection add-on cover, the insurer will consider the depreciated value of your bike's engine while settling the claim.

FAQs

Q1. What is IDV in bike insurance?

IDV stands for Insured Declared Value, which is the current market value of your bike. The IDV is the maximum amount that the insurance company will pay in case of theft or total loss of your bike.

Q2. How is the depreciation rate calculated in bike insurance?

The depreciation rate is calculated based on the age of your bike and its current market value. The depreciation rate varies from one insurer to another and can range from 5% to 50%.

Q3. Can I opt for a zero-depreciation add-on cover in bike insurance?

Yes, you can opt for a zero-depreciation add-on cover in bike insurance, which will cover the full cost of repairing or replacing the damaged bike parts without considering the depreciation value.

 

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