Does Depreciation Affect Your Two-wheeler Insurance Premium?

Before buying the best two-wheeler insurance, you must calculate the premium amount using the online premium calculator available on the internet. While calculating the premium, you may forget to consider the depreciation factor. A depreciation plays a vital role in deciding your two-wheeler insurance premium. Read below to know how this effect your bike insurance premium.

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What Do You Understand by Depreciation in Two-Wheelers?

In the insurance industry, depreciation refers to the rate by which your insurer quantifies the loss of value of an insured vehicle due to factors like regular wear & tear, aging, etc. The depreciation rate depends upon the Insured Declared Value (IDV) of your bike, which differs for every model. Also, the older the vehicle the higher its depreciation rate.

How Does Depreciation Affect the Insurance Premium Price?

As your two-wheeler gets older with time, the rate of depreciation lowers the IDV.

Insured Declared Value (IDV) is the total amount your insurer will compensate you for the damages caused to your vehicle during an accident. It is determined by the market value of the vehicle rather than the cost of the vehicle. Therefore, the rate of depreciation will decide the amount that your insurance company will compensate during an accident.

Also, as your vehicle gets older, you will have to pay a lower premium, but it also decreases the compensation amount in case of any mishap.

Rate of Depreciation for Your Bike

In India, as a bike owner, you must have at least the best bike insurance plan which covers all the financial and legal liabilities for the third party during a road mishap. So, it becomes important for all bike owners to have this plan. However, the premium you pay for this plan will be determined by the depreciation rate. In context to that, we have mentioned depreciation rates set by the IRDAI as per the bike's age and parts of the bike-

Rate of Depreciation According to the age of the bike

Age of the Bike Rate of Depreciation in %
Less than 6 months old 0%
Between 6 months – 1 year 5%
Between 1 – 2 years 10%
Between 2 – 3 years 15%
Between 3 – 4 years 25%
Between 4 – 5 years 35%
Between 5 – 10 years 40%
More than 10 years old 50%

Rate of Depreciation According to the Bike Parts

Below we have mentioned the rate of depreciation as per the parts of bike-

Bike Parts Rate of Depreciation in %
Rubber/plastic/nylon parts of the bike 50%
Batteries, tyres and tubes of the bike 50%
Fiber glass parts 30%

For instance, your bike meets with an accident, and tyres of the bike are damaged. In such a case, 50% of the replacement bill will be borne by your insurer and the remaining 50% will be paid by you.

However, having a zero-depreciation add-on cover in a bike will help you offset the losses from depreciation.

What is Zero-depreciation Cover in Bikes?

Zero depreciation add-on cover in bikes is a solution to save expenses due to depreciation. As the name suggests, this is an add-on cover that can be purchased by paying an extra premium amount. Also, with zero depreciation add-on , your insurer will compensate for the losses or damages without considering the depreciation.

Benefits of Zero-depreciation Cover in Bikes

  • The zero depreciation cover is an add-on that will help you in saving money while paying a premium.
  • You get peace of mind because claims are paid in full without calculating depreciation.
  • Under this, insured parts would be reimbursed in full, resulting in no expenses from your pocket.

What is Not Covered Under Zero-depreciation Cover?

Below are some exclusions of this add-on cover-

  • Under this cover, you can raise a maximum of 2 claims. However, some insurers allow unlimited claims.
  • The damages to the bike parts due to regular wear and tear are not covered.
  • This add-on cover is suitable for up to two years of the bike's age.
  • This cover does not give benefits in case of theft, total loss, or constructive total loss.
  • Your insurance company will accept only own-damage claims that occurred in an accident.

Who Should Buy Zero-depreciation Cover in Bike?

A zero depreciation cover in a bike is an affordable cover that saves a lot in replacement or repair costs. Also, it is ideal for all the new drivers and new bike owners.

You should buy this cover if your bike is not older than 2 years. It is also recommended for those who live in an accident-prone area or have a sports bike.


A depreciation plays a vital role in deciding the IDV of the bike. To prevent it, you can buy a zero depreciation add-on cover in a bike insurance policy. However, it will increase your premium, but this way, your compensation amount is not affected by the depreciation rate.

Written By: PolicyBazaar - Updated: 22 April 2022

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