What is Zero Depreciation in Bike Insurance? (Meaning Explained)

Are you planning to scoot around the city and have a good time? Be sure to get your bike insured first. That being said, all insurance policies and riders are not the same. You will do yourself a disservice if you do not know about the concept and meaning of Zero Depreciation in bike insurance. This article will explain to you the following:

• Meaning of Zero Depreciation in Bike Insurance
• How does Zero Depreciation work?
• Example of Zero Depreciation in Bike Insurance
• Companies offering Zero Depreciation riders

Meaning of Zero Depreciation in Bike Insurance

Depreciation affects everything, your car, two-wheeler, other non appreciating assets and more. It is the loss of value of an asset as the years move forward. Your two-wheeler is also a victim of this. Imagine this, you buy a brand new motor bike, and it works perfectly for the first couple of years. Then as the years move forward, it starts giving minor issues, and then major ones. Now, you want to sell your bike. Prospective buyers will keep in mind the wear and tear of your bike and quote you an offer price. This price will be much lower compared to the price you paid to buy the brand new bike, this is essentially a real world example of depreciation in bike insurance.

Even though it is not generally possible to protect your bike against the loss of value caused by depreciation, you can at least protect yourself against the evil head of depreciation in your bike insurance policy. How so? Well, you buy a Zero Depreciation rider along with your bike insurance policy.

How does Zero Depreciation work?

If you buy a Zero Depreciation rider or add-on along with your bike insurance policy, it will protect you against depreciation whenever you decide to apply for a motor insurance claim. Like we previously said, every part of your bike depreciates, and the insurance company knows about this. That is why they incorporate the concept of depreciation whenever they sell a motor insurance policy.

For instance, if your motor insurance company provides 100% coverage if there is any damage to the headlight of the bike within the first year, they may reduce the coverage to 80% in the second year, and 50% in the 3rd year. So, if a policyholder damages his bike’s headlight in the 3rd year and files a claim, the insurance company will only pay him 50% of the claim amount, the balance will need to be paid by the owner himself.

You can extrapolate this example to other parts of your bike. The concept remains the same. So how does a Zero Depreciation rider benefit a policyholder? Well, It acts as a shield against depreciation so the insurance company is obligated to not factor in depreciation while disbursing the claim amount.

Example of Zero Depreciation in Bike Insurance

Let us understand this concept with two simple to understand examples.

Example 1: Mr. Shyam bought a new two-wheeler and consequently bought comprehensive motor insurance for the same. After a couple of years, Mr. Shyam met with a minor accident damaging his bike’s headlight. Upon making the claim, the motor insurance company only disbursed 70% of Mr. Shyam’s claim application amount, citing a 30% depreciation component. Thus, Mr. Shyam had to pay the balance 30% for repairs out of pocket.

Example 2: Mr. Dinesh bought a new bike, and like Mr. Shyam he too bought comprehensive motor insurance, the only difference was that he bought a Zero Depreciation add-on along with the policy by paying a little extra. After 5 years, Mr. Dinesh also met with a minor accident damaging his headlight. Since he bought a Zero Depreciation rider/add-on, the insurance company disbursed him the entire claim amount.

Companies offering Zero Depreciation riders

Now that you have understood the benefits and features of Zero Depreciation. Let us have a look at the top bike insurance companies that offer Zero Depreciation riders:

• Bajaj Allianz
• HDFC ERGO
• Digit Insurance
• Future Generali
• Kotak Mahindra Insurance
• Acko Insurance
• SBI General Insurance
• Royal Sundaram
• Tata AIG
• IFFCO TOKIO