Team AckoMay 16, 2022
The value of a two-wheeler depreciates with time. Having a core Comprehensive Bike Insurance policy is a good way to cover the cost of any damage that may incur to your vehicle and any third-party liability.
Tthe cost of repair or replacement of the depreciable parts, rubber, plastic, metal, etc. are not fully covered under the comprehensive policy. Only a certain percentage of the payment for the parts is covered, however, the deductible depreciable cost must be borne by the policyholder.
To ensure you don’t pay any extra amount from your pocket; you should opt for an add-on cover i.e. Zero Depreciation Cover.
Let us first know what depreciation means when it comes to bike insurance before defining Zero Depreciation cover.
A Zero Depreciation Add-on is extra coverage that you can avail along with a Comprehensive Two-wheeler Insurance policy. Depreciation is the reduction in the value of an asset due to wear and tear, it increases with the passage of time. That is why insurance companies reduce this value while settling a claim. However, with a Zero Depreciation Add-on, this depreciation of your two-wheeler won’t be deducted as it is not taken into account while settling the vehicle’s insurance claim.
Depreciation is the reduction in the value of a two-wheeler with passing time. Due to depreciation, the cost of repair of depreciable bike parts such as plastic, nylon, metal, rubber, etc. is not fully covered. Your insurer will partially pay for the cost of repair/replacement of such parts.. The rest of the deductible depreciable cost of bike part(s) is borne by the owner of the insured bike.. This deducted depreciation cost varies with the material of the part.
The table below gives the percentage to be borne by the owner of the bike:
|Depreciable Bike Parts||Deducted Depreciation|
|Rubber, Nylon, Plastic Parts||50%|
|Tubes and Tyres||50%|
The rate of depreciation depends on the age of respective parts of a bike. Take a look at the following table to understand this better:
|Age of the vehicle||% Depreciation|
|Not exceeding 6 months||Nil|
|Exceeding 6 months but not exceeding 1 year||5%|
|Exceeding 1 year but not exceeding 2 years||10%|
|Exceeding 2 years but not exceeding 3 years||15%|
|Exceeding 3 years but not exceeding 4 years||25%|
|Exceeding 4 years but not exceeding 5 years||35%|
|Exceeding 5 years but not exceeding 10 years||40%|
|Exceeding 10 years||50%|
Say you have a standard bike insurance policy and a plastic part of your bike needs replacement. After your claim is approved by your insurance company, they will pay 50% of the replacement cost for this plastic part and the remaining 50% will be borne by you.
However, if you buy a Zero Depreciation Add-on, your insurer will bear 100% of the cost for replacing this plastic part. With this add-on you do not have to bear the cost of depreciation(i.e. 50%) of the plastic part.
For better understanding, two-wheeler insurance can be classified as (1.) Third-party Liability Insurance (2.) Comprehensive Two-wheeler Insurance (3.) Comprehensive Two-wheeler Insurance + Add-ons.
The Motor Vehicles Act, 1988 has made it mandatory for vehicle owners in India to at least purchase a Third-party Liability insurance policy. This type of insurance policy is designed for the pedestrians and other third parties on the road that might be affected by your vehicle.
Comprehensive Two-wheeler Insurance includes the Third-party Liability insurance and insures the vehicle against risks such as accidents, calamities, theft, etc.
Along with a Comprehensive Two-wheeler Insurance, you can also choose Add-on covers such as Zero Depreciation, Two Wheeler Roadside Assistance, Pillion Rider Cover, Return-to-invoice etc.
A Comprehensive Bike Insurance policy will cover the cost for damage incurred to the insured bike (Under Own Damage component) and third-party liability (accidental death or disability to a person or damage to the property).
The cost of repairing or complete replacement of depreciable bike parts such as: rubber, plastic, metal, glass, nylon, fiber is not fully covered under a comprehensive policy.
Whereas, having an add-on of Zero Depreciation ensures that you don’t pay any extra amount at the time of claim. With Zero Depreciation cover, the cost of depreciable parts is fully covered.
The table below shows the major difference between a Comprehensive and Zero Depreciation cover.
|Key Points||Comprehensive Policy||Zero Depreciation|
|Claim Settlement||Deduction in the assessed claim cost||Full payout for the parts|
|Depreciable Bike Parts Cost||Not fully covered||Fully covered|
|Vehicle Age Suitability||Up to 15 years of age||Up to 2 years of age|
|Premium||Comparatively lesser than Zero Dep||15-20% higher|
To make things simpler let’s understand with an example:
Raj and Mahesh bought a new bike of same type for Rs. 80,000 in Jan 2017.
Raj bought only Comprehensive Policy and Mahesh bought a Comprehensive policy with a Zero Depreciation add-on.
Consider a case where they both meet with a minor accident. They are entitled to receive the repair cost of the damage, but the values will be different. Here’s the difference:
Raj has to pay the deduction costs for the replacement of say:rubber, plastic, metal, glass, fiber parts, etc, on account of depreciation. Whereas, repairing and replacement cost is not paid by Mahesh. The whole cost for Mahesh will be borne by Acko.
Yes. Let us understand this with an example.
Consider the IDV of the bike as Rs. 65,000
The premium paid by Raj is Rs. 1,200, because he bought only Comprehensive policy whilst Mahesh paid Rs. 1,440 (i.e. Rs. 240 extra) by adding a Zero Depreciation cover
The total repair cost is Rs. 4,000
Repair Cost Table:
|Key Points||Damage Cost||%Depreciation Deducted||Depreciation Cost|
Consider the cost invested by Raj and Mahesh
|Key Points||Raj (Rs.)||Mahesh (Rs.)|
|Repair Cost Paid||750||0|
|Total Money Invested||1,950||1,440|
|Savings (Rs.) (Workshop Cost – Total Money Invested)||4,000 – 1,950 = 2,050/-||4,000 – 1,440 = 2,560/-|
Total Money Invested by Raj is Rs. 1,950, whereas, Mahesh invested Rs. 1,440.
The total repair cost is Rs. 4,000
From the example you can see that, even though Mahesh had to pay Rs. 240 extra to buy a Zero Depreciation cover, he did not have to pay money at the time of claim. Thus, he saved Rs. 500. On the other hand, Raj had to bear the entire cost of depreciation.
In this way, you will gain from a Zero Depreciation cover in the long run, even if you spend an extra amount to buy it.
The cost of repair and replacement of depreciable parts is fully covered
No need to pay extra money at the time of claim
There some exclusions under Zero Depreciation cover:
Zero depreciation cover is available maximum up to the vehicle age of 2 years
Maximum 2 claims in a policy period
Usual wear and tear of parts that need repair or replacement is not covered
Claim shall be accepted only if the incurred damage is due to the perils mentioned in Own Damage
You do not get the Zero Depreciation benefit in case of Total Loss (theft or stolen bike) or Constructive Total Loss (damage beyond repair)
The one who has a new and/or expensive bike
If your two-wheeler is not older than 2 years
When a person is located in accident prone area or heavily trafficked area
In case the person doesn’t want to pay any money for repair or replacement at the time of claim
Zero Depreciation is a pocket-friendly add-on cover that gets you covered for the cost of depreciable parts. The whole repair cost will be borne by Acko if you have our Zero Depreciation add-on cover for your bike.
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