Depreciation is the decrease in the bike's value due to age and wear and tear. It reduces the bike's Insured Declared Value (IDV), which is the highest limit up to which the own-damage/comprehensive policy will pay out, and, in turn, reduces the annual premium. Moreover, at the time of a claim, the value of depreciation will be deducted from the cost of the repaired/replace dpart(s), which means you will be compensated less and hence you lose your part of the money. That an older bike is cheaper to insure is only one side of the coin.
With a standard policy, you receive less money at time of claim unless you add a zero-depreciation cover.
What is depreciation in bike insurance?
Depreciation for bike insurance implies a gradual lowering of value of your bike and its part over a period owing to deterioration, use, and age-related wear. They are mainly calculated and applied in two ways:
For the entire vehicle: The depreciation factor in insurance is basically age-related fixed percentage to IDV, which is also the amount of Insurer declared that they agree to give.
Part-specific depreciation: When during a repair claim a part is replaced, depreciation is deducted from that part's cost based on the material of that part (e.g., rubber, plastic, metal).
As the Insurer Declared Value for bike is simply the sum insured under your policy on the bike, that is the biggest money you'll receive in a total loss scenario and a theft. On the basis of IDV, the Premium is also calculated, as it is just the percentage of the IDV.
How is depreciation applied to bike parts at claim time?
With the regular coverage under a comprehensive bike insurance policy, when your insurer pays for a repair or replacement, it does not pay the full price of the parts. Your insurer estimates the age/condition and deducts some amount from the value of the part as an allowance for wear and age, and you have to cover that portion. That deductible amount varies according to the type of part material.
| Type of part | Depreciation deducted |
|---|---|
| Rubber, nylon, plastic parts, batteries | 50% |
| Fibreglass components | 30% |
| Glass parts | Nil |
| All other parts (metal), by age of bike | See slab below |
Depreciation for metal and painted parts generally increases with the bike's age as does the IDV slabs:
0% within the first 6 months
5% between 6 months to 1 year
10% for 1 to 2 years
15% for 2 to 3 years
25% for 3 to 4 years
35% for 4 to 5 years, and more than 35% for vehicles older than 5 years.
Paint is usually treated with 50% depreciation on the material component.
A worked example: what depreciation costs you
Let's say you are going to get a brand new bike with an on-road showroom value of Rs 1, 20, 000. Here is how depreciation affects premium and claim.
Effect on IDV and premium
Assume the own-damage premium is charged at 2% of IDV.
| Age | Depreciation | IDV | Own-damage premium at 2% |
|---|---|---|---|
| New (up to 6 months) | 5% | Rs 1,14,000 | Rs 2,280 |
| 1 to 2 years | 20% | Rs 96,000 | Rs 1,920 |
| 4 to 5 years | 50% | Rs 60,000 | Rs 1,200 |
Due to depreciation alone, IDV diminishes which leads premium to be lower. So, premium reduces from Rs 2, 280 to Rs 1, 200 in a span of five years simply because of depreciation.
Effect on a repair claim
Let's say a 3-year-old bicycle is involved in an accident. The repair work will include a plastic side panel which will cost about Rs 4,000 and a metal part costing Rs 6,000 along with Rs 2,000 labours. The minimum compulsory deductible is Rs 100.
| Item | Bill | Depreciation | Insurer pays |
|---|---|---|---|
| Plastic panel | Rs 4,000 | 50% (Rs 2,000) | Rs 2,000 |
| Metal part (2 to 3 yr) | Rs 6,000 | 15% (Rs 900) | Rs 5,100 |
| Labour | Rs 2,000 | Nil | Rs 2,000 |
| Less compulsory deductible | - | - | (Rs 100) |
| Total (bill Rs 12,000) | Rs 12,000 | Rs 2,900 | Rs 9,000 |
With a Rs 12,000 invoice you get back Rs 9,000, you only need to pay Rs 3,000 of money from pocket, among the amount Rs 2,900 is depreciation. This loss is precisely the type of problem a zero-depreciation add-on covers.
The trade-off in one line
As a bike gets older, depreciation reduces your bike insurance Premium but it increases you having to pay a higher share of every bike repair cost. A bike which is getting older will come to a lower insurance premium and it will not be free ride as the policy bearer is carrying a huge proportion of the bike repair risk themselves.
Can You avoid depreciation deductions on bike insurance claims?
Yes, with a zero-depreciation cover (also called nil-depreciation or bumper-to-bumper cover), an optional add-on. It waives the depreciation deduction on replaced parts, so the insurer pays the full cost of parts like plastic, rubber, and metal instead of a depreciated amount. In the worked example above, a zero-depreciation policy would have paid the Rs 2,900 that depreciation removed, leaving you to pay only the compulsory deductible.
The add-on raises your premium, typically by around 15% to 25% of the own-damage premium.
It is usually offered on newer bikes, commonly up to 5 years old.
Insurers often cap the number of zero-depreciation claims allowed per policy year.
Note that zero depreciation does not change the IDV or the total-loss payout; it only removes the depreciation deduction for part replacements during repairs.
Does bike insurance pay less for total loss or theft due to depreciation?
Yes, but indirectly. Should the bike be stolen or written off as uneconomical to repair, then the amount the insurance company will pay you will be the IDV, and not the initial cost of purchasing the bike. This is because the IDV has depreciated.
Using the earlier example, a total loss on a new bike pays up to Rs 1,14,000, while the same bike at 4 to 5 years old pays only up to Rs 60,000. Zero depreciation add-ons do not raise this figure; the IDV is the ceiling for a total-loss or theft settlement regardless of add-ons.
Key takeaways
Depreciation reduces both your bike's Insured Declared Value (IDV) and the payout on replaced parts at claim time.
IDV depreciation follows the IRDAI age slabs: 5% up to 6 months, 15% up to 1 year, 20% for 1 to 2 years, 30% for 2 to 3 years, 40% for 3 to 4 years, and 50% for 4 to 5 years.
Since the own-damage premium is a percentage of IDV, the premium falls each year as the bike depreciates.
On claims, rubber, plastic, and battery parts carry 50% depreciation, fibreglass 30%, glass nil, and metal parts a rising rate by age.
A zero-depreciation add-on waives the part-depreciation deduction but raises the premium by roughly 15% to 25% and is usually limited to bikes up to about 5 years old.
Depreciation does not apply on top of the IDV in a total-loss or theft claim; the IDV itself is the maximum payout, and zero-depreciation add-ons do not increase it.
Frequently asked questions
The own-damage part of your premium tends to fall each year because it is calculated as a percentage of the IDV, and depreciation reduces the IDV annually. The mandatory third-party premium, however, is a fixed IRDAI rate and does not change with depreciation.
No. Depreciation applies only to the cost of replaced parts, based on their material and the bike's age. Labour charges are generally paid in full, subject to your deductible and policy terms.
After 5 years. Beyond that, the IDV is not fixed by the standard slab table; it is agreed between you and the insurer based on the bike's condition and market value.
No. A total-loss or theft claim is settled at the IDV, which is the ceiling. Zero-depreciation only removes the depreciation deduction on replaced parts during repairs; it does not raise the IDV.
No. Glass parts are typically settled with nil depreciation, so the insurer pays their full replacement cost. Rubber, plastic, and battery parts carry the highest deduction at 50%.
About the authors
Nikhila PS
Written by · Senior Content EditorNikhila is a content creator with 6+ years in EdTech and motor insurance, turning complex policies into clear, engaging content. She enjoys exploring digital trends, social media, and art while planning her next short escape.
Rekhit Singh Kaushal
Reviewed by · Senior Director - Motor UnderwritingRekhit Singh Kaushal is Senior Director at ACKO, a leading digital motor insurance provider in India. With deep expertise in insurance strategy and innovation, he brings trusted insights on car and bike insurance to help drivers stay protected.
