In India, it is compulsory for every two-wheeler owner to get his vehicle insured. Most people get the third-party insurance which has the lowest premium. Some go for a comprehensive plan that provides an even better coverage as it covers Own Damage (OD) also. For people who love and care for their two-wheeler even more, there is an add-on cover called zero depreciation cover for two-wheelers, that provides the best coverage for your vehicle.
What is Meant by Depreciation?
In simple words, depreciation is the decrease in the market value or your two-wheeler as it ages with passing time. The reason being the normal wear and tear that happens over time, which results in the reduction of the overall value of the two-wheeler.
Not only does the total value of your two-wheeler depreciate over time, but also the values of several individual parts also depreciate.
Therefore, at the time of claim settlement, the insurance company takes into account the cost of depreciation and reduces it from the total claim amount. Because of this, the policy holder gets a lower amount of compensation from the insurance company.
Let us see how depreciation is calculated.
The Insurance Regulatory and Development Authority of India (IRDAI) has put down the following guidelines for insurance companies to calculate the amount of depreciation for each part of the two wheeler.
- For parts made of rubber or nylon or plastic, tyres and tubes, batteries - 50%
- For parts made of fiberglass - 30%
- For parts made of glass – Nil
The rate of depreciation for all other parts including wooden parts is calculated as per the following schedule.
Age of Two-wheeler
% of Depreciation
Up to 6 months
6 months to 1 year
Rate of Depreciation for Painting: In the case of painting, the depreciation rate of 50% is applied only on the material cost of total painting charges. In case of a consolidated bill for painting charges, the material component is considered as 25% of total painting charges.
To avoid paying for the depreciation of your two- wheeler and its parts, you should get a zero depreciation add-on cover along with a comprehensive two-wheeler insurance policy.
What is Zero Depreciation Insurance Cover?
A zero depreciation cover is a type of add-on cover that can be bought along with a comprehensive insurance policy.It also goes by the name "Nil Depreciation" or "Bumper to Bumper Cover," and at the time of submitting a claim, it offers a 100% depreciation coverage for practically all sections of your two-wheeler. Your insurance provider will cover the whole cost of any repairs or part replacements if an accident damages your two-wheeler.
This add-on is the perfect enhancement to your two-wheeler insurance policy, especially if you have purchased a new bike or a sports bike with expensive parts. If you wish to save on the depreciation costs and gain maximum claim amount then this policy cover is the best thing for you.
A zero depreciation cover comes at a slightly higher cost along with a comprehensive plan. It generally costs around 10%-15% more than the comprehensive plan. However, premium prices may differ from company to company.
One thing to keep in mind is that the majority of insurance providers only permit 2 claims under zero depreciation cover. If you file a claim for the third time, the insurance will no longer be deemed zero depreciation and become standard.
What is Included in the Zero Depreciation Cover?
The following things are covered under zero depreciation cover
1 Losses due to depreciable parts such as rubber or nylon or plastic parts.
2 Compensation for repair and replacement of two-wheeler parts.
3 Some insurance companies also provide compensation for battery and tyres without considering the depreciation.
4 Generally the number of permissible claims is 2 during the policy period. Although this number may vary from company to company.
What is Excluded in the Zero Depreciation Cover?
The following things are not covered under zero depreciation cover
1 Loss or damage because of an uninsured risk or hazard.
2 Losses incurred due to mechanical or electrical breakdown.
3 Compensation for items that are not insured such as bi-fuel kit, tyres and gas kits are excluded from the zero depreciation policy.
4 Damage caused due to a non-listed peril.
5 Total loss that is loss beyond repair or theft. However, in case of theft of the two-wheeler, the payout will be based on the Insured Declared Value (IDV) of the two wheeler.
Benefits of Zero Depreciation Cover
1. Coverage Enhancement: Zero dep add-on cover enhances your basic insurance policy. By paying a slightly more for add-on cover, you can increase the coverage of your two- wheeler.
2. Higher Claim Amount: Various two wheeler parts have different depreciation rates. Zero dep does not consider this depreciation at the time of claim settlement. Therefore you get a higher claim amount.
3. More Money Saved: Zero depreciation add-on costs slightly more than a comprehensive plan, But at the time of settlement, depreciation is not taken into account. Hence your out of pocket expenses are saved.
4. No Burden on Policyholder: With zero depreciation a policyholder can peacefully ride his two-wheeler without any tension or burden because he knows that he will be fully compensated incase of an accident or mishap.
A zero depreciation add-on cover with a comprehensive insurance plan is the complete solution for all your two-wheeler insurance needs. It provides wholesome protection to your two-wheeler, including the individual parts. So what if you have to shell out a few extra bucks? Look at the bright side and think about the money that you may end up saving over repairs and replacements.