Bikes age and begin to lose value because they are depreciating assets. The leading cause of this is wear and tear. Therefore, if you buy a new bike and try to sell it after five years, you will only get a small portion of the price you paid. Depreciation is the rate at which a bike loses market value.
Depending on the level of coverage you require, you can choose between third-party bike insurance and comprehensive bike insurance when purchasing a bike insurance policy. Only third-party liabilities are covered by third-party insurance policies. As a result, your bike’s damage is not covered. As a result, the insured vehicle’s current market value does not affect the coverage or the premium.
Let’s first define IDV before examining the effect of depreciation on bike insurance rates.
Your bike’s market value is the Insured Declared Value (IDV). It is also the sum that the insurance company will pay if the insured bike is destroyed. If a bike is stolen or irreparably damaged, it is deemed a total loss. Depreciation is taken into account when insurance companies determine the IDV.
Depreciation’s Effect On Two-Wheeler Insurance Rates
A lower IDV is the result of the increasing rate of depreciation. As a result, the insurer will offer less compensation if the insured bike is destroyed. This directly affects the two-wheeler insurance policy’s premium. A lower premium is the result of a lower IDV. ##
As a result, your bike insurance policy’s cost decreases as its depreciation rate rises.
What Is The Rate Of Bike Depreciation?
The Insurance Regulatory and Development Authority of India (IRDAI) has established the depreciation rates for two-wheelers in India. Based on the vehicle’s age, which is described below. #
|Age of the bike||Two Wheeler Depreciation Rate|
|Under six months||5%|
|Between 6 months and a year||15%|
|Between 1 and 2 years||20%|
|Between 2 and 3 years||30%|
|Between 3 and 4 years||40%|
|Between 4 and 5 years||50%|
|Over five years||IDV decided by the Insurance Company and the Individual|
Additionally, the IRDAI has also laid down clear guidelines to calculate bike depreciation rate for different bike parts as detailed below: # 
|Parts of the two-wheeler||Depreciation RateDeprciation Rate|
|Rubber, plastic, or nylon||50%|
|Batteries, tyres, and tubes||50%|
To better comprehend the effect of depreciation on the IDV, let’s look at an example:
Rajiv buys a used bike with a year on it. The cost of the specific bike model, ex-showroom, is Rs. 1 lakh. He decides to buy a Bajaj Allianz comprehensive bike insurance plan. After considering the bike’s age, the insurer determines the IDV as Rs. 80,000 (20% depreciation for bikes between 1 and 2 years old). Rajiv is consequently charged a premium for an 80,000 rupee insurance sum. Let’s say Rajiv has an accident and needs his bike fixed. The insurer will determine the compensation amount based on the IRDAI-specified depreciation rates for the various bike parts. #
Make sure you follow the process of how to renew your bike insurance on time.
# Visit the official website of IRDAI for further details.
## All savings are provided by the insurer as per the IRDAI-approved insurance plan. Standard T&C apply
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.