Having bike insurance is an important part of being a responsible vehicle owner, as it offers financial protection in case of unexpected accidents, theft, or damage. It also helps avoid penalties for non-adherence to the law. Yet, it is crucial to comprehend the complexities of bike insurance, especially the significance of zero depreciation coverage, in order to make well-informed choices.
In this blog post, we will discuss the importance of zero depreciation coverage in motorcycle insurance and how it can be advantageous for you.
What Is Zero Depreciation Cover?
Zero depreciation cover, also known as "nil depreciation" or "bumper-to-bumper" cover, is a supplementary feature in motorcycle insurance policies. This add-on guarantees that the insurance firm will cover the complete expense of repairing or replacing bike parts without taking into account depreciation. This rider is only available with comprehensive bike insurance.
Understanding Depreciation in Bike Insurance
To understand the significance of zero depreciation cover, it is crucial to have a clear understanding of what depreciation entails. It is the decline in an asset's value caused by factors like age, wear and tear, efficiency, etc. Depreciation impacts the amount you get paid for bike repairs or replacements by the bike insurance.
For example, suppose the plastic parts, rubber components, or metal parts of your bicycle are damaged. In that case, the insurance company will determine the claim amount by subtracting the depreciation value of these parts. The table below shows the standard depreciation rates for various components of a bike.
Depreciable Bike Parts
Depreciation Rate
Rubber, Nylon, Plastic Parts
50%
Fiberglass
30%
Tubes and Tyres
50%
Glass
0%
As shown, a significant portion of the cost is deducted as depreciation, leaving you to cover the remaining amount out of pocket.
Types of Bike Insurance
Prior to exploring zero depreciation cover further, it is essential to grasp the various kinds of bike insurance policies that are offered:
Third-party Liability Insurance: This is the most essential type of bike insurance and is mandated by the Motor Vehicles Act 1988. It covers third-party liabilities, like injury to other persons or damages to their properties caused by your bike. Nonetheless, it does not cover any damages to your own car.
Comprehensive Bike Insurance: This policy provides more extensive coverage, encompassing third-party liabilities and damage to your bike from accidents, natural disasters, theft, etc. It offers a broader safety net but doesn't fully cover repair costs due to depreciation.
Comprehensive Bike Insurance + Add-ons: In addition to the basic comprehensive bike insurance policy, you can opt for various add-ons like zero depreciation cover, roadside assistance, pillion rider cover, and return-to-invoice cover to enhance your protection.
Difference Between Comprehensive Bike Insurance and Zero Depreciation Cover
Although comprehensive bike insurance provides significant coverage, it does not completely safeguard you from the depreciation expenses of specific bike components. This is when zero depreciation coverage becomes important.
Here is a comparison of a basic comprehensive policy and one with zero depreciation coverage added to it:
Key Points
Comprehensive Policy
Comprehensive Insurance + Zero Depreciation Cover
Claim Settlement
Deduction in claim amount
Full payout for parts
Depreciable Bike Parts Cost
Partially covered
Fully covered
Vehicle Age Suitability
Up to 15 years
Up to 2 years
Premium
Lower
15-20% higher
Example to Illustrate the Difference
Let’s consider an example to better understand the impact of zero depreciation cover:
Scenario 1: Raj buys a comprehensive bike insurance policy for Rs 1,200 without zero depreciation cover. After an accident, the repair cost amounts to Rs 4,000. Due to depreciation, Raj has to bear Rs 750 out of pocket for the repair costs.
Scenario 2: Mahesh buys a comprehensive policy with zero depreciation cover for Rs 1,440 (Rs 240 extra). After a similar accident, Mahesh doesn’t have to pay anything for the repairs, as the insurance covers the entire Rs 4,000.
In this scenario, Mahesh saved Rs 500 despite paying a higher premium initially.
Benefits of Zero Depreciation Cover
The advantages of including a zero depreciation add-on to your comprehensive insurance plan are:
Full Coverage of Repair Costs: Through zero depreciation coverage, the insurance company will pay for the full cost of replacing depreciable parts made of rubber, plastic, and metal without taking into account their depreciation value.
Reduced Out-of-Pocket Expenses: If you don't have zero depreciation cover, you might need to cover a substantial cost from your own pocket because of depreciation deductions. Zero depreciation coverage removes this responsibility, guaranteeing that you won't face any unforeseen costs when settling a claim.
Enhanced Financial Security: Zero depreciation cover gives reassurance by offering full protection, particularly for new or costly bikes. It is especially advantageous for people who wish to reduce their financial responsibility in the event of an accident.
Ideal Conditions for Availing Zero Depreciation Cover
Zero depreciation cover is best suited for the following situations:
New or Expensive Bikes: Owners of new or high-end bikes can benefit greatly from zero depreciation cover, as it provides complete protection for expensive parts.
Vehicles Not Older Than 2 Years: Most insurers offer zero depreciation cover only for bikes up to 2 years old. If your bike falls within this range, it’s an ideal add-on to consider.
High Traffic or Accident-Prone Areas: If you live in an area with heavy traffic or a high likelihood of accidents, zero depreciation cover can be a valuable investment.
Exclusions of Zero Depreciation Cover
Despite the numerous advantages of zero depreciation coverage, it is crucial to understand its constraints.
Age of Vehicle: Zero depreciation cover is typically available only for bikes up to 2 years old.
Limited Number of Claims: Insurers often limit the number of claims under zero depreciation cover to two per policy period.
Wear and Tear: Normal wear and tear or mechanical breakdowns are not covered under zero depreciation cover.
Total Loss or Constructive Total Loss: If your bike is stolen or damaged beyond repair, zero depreciation cover does not apply.
Conclusion
Zero depreciation protection is a valuable addition to your motorcycle insurance policy, providing full coverage for the depreciation expenses of the vehicle components. Despite the slightly higher upfront cost, the long-term monetary gains make up for the extra expense. Choosing zero depreciation cover for your bike insurance gives you peace of mind by providing extensive coverage and lower out-of-pocket payments. If you have a new bike, a costly model, or reside in a high-risk area, opting for this rider is a smart decision to protect your investment.
Disclaimer:The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.
