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?
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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