The Motor Vehicles Act, 1988 lays down the rules and regulations for motor vehicles running in India. One such rule which is mandatory under the Act is the requirement of a valid bike insurance policy if you own a bike. The Act states that every bike on Indian roads should be insured under a valid third party liability cover. The policy would cover the financial liability incurred if the bike causes injury, death or property damage to another individual.
Though third party policies are mandatory by law, they do not cover the damages suffered by the bike itself. That is why there are comprehensive package policies. Comprehensive bike insurance plans cover the mandatory third-party liability as well as the damages suffered by the bike itself. If your bike is stolen, damaged in an accident or damaged due to any natural or man-made causes, the comprehensive policy would pay the financial loss that you suffer.
Bike insurance policies are indemnity oriented plans. They pay for the actual financial loss that you suffer. That is why, in a comprehensive policy, when there is a claim for the parts of the bikes which have been repaired or replaced, the insurance company does not pay the actual cost incurred. The depreciation of the parts is taken into consideration to find the actual value of the parts which have been replaced or repaired.
The Rate of Depreciation:
The rate of depreciation in different parts is as follows –
| Bike parts | The applicable rate of depreciation |
| Rubber, plastic or nylon parts | 50% |
| Fibreglass parts | 30% |
| Tyres and tubes | 50% |
| Metal parts | As per the depreciation of the Insured Declared Value of the bike |
This depreciation reduces the total amount of claim payable under the bike insurance policy.
For instance, suppose your bike meets with an accident and the following costs are incurred in repairs –
| Repairs of the plastic parts of the bike | INR 7500 |
| Change of tyre | INR 5000 |
| Repair of fibreglass parts | INR 5000 |
| Labour charge | INR 5500 |
| The total cost of repairs | INR 23,000 |
However, at the time of claim, depreciation would be taken into consideration and the amount of claim payable would be determined as follows –
| Particulars | Amount | Applicable depreciation | Admissible claim amount |
| Repairs of the plastic parts of the bike | INR 7500 | 50% | INR 3750 |
| Change of tyre | INR 5000 | 50% | INR 2500 |
| Repair of fibreglass parts | INR 5000 | 30% | INR 3500 |
| Labour charge | INR 5500 | Nil | INR 5500 |
| Total claim payable | INR 15,250 |
Though the repair costs incurred were INR 23,000, the insurance company would pay a claim of INR 15,250 only. The remaining INR 7750 would have to be paid by you from your own pocket.
Zero depreciation add-on – the solution:
Since depreciation eats into the claim amount, insurance companies offer a zero depreciation add-on cover. If you choose this add-on, the effect of depreciation would be ignored at the time of calculating the claim amount. The insurance company would pay the total amount incurred in replacing or repairing the parts of the bike.
Zero depreciation bike insurance policy – the inclusions and exclusions:
A zero depreciation bike insurance policy is nothing but a comprehensive bike insurance policy with a zero depreciation add-on. The policy, therefore, covers the following instances of claims –
- Third-party liability incurred for death or physical injury suffered by a third party
- Third-party liability for property damage
- Damage to the bike due to natural or man-made causes
- Theft or robbery of the bike
- Personal accident cover for accidental deaths or disablements
Moreover, there are instances when the policy would not cover the losses suffered. These instances are called exclusions and they include the following –
- Damages suffered when driving under the influence or without a valid driving license
- Damages suffered outside the boundaries of India
- Consequential losses
- Damages suffered when the bike is being used against the limitations of its use
- Mechanical or electrical breakdowns
#4 Important things to remember about Zero Depreciation rider in a Motor Insurance Policy
If you opt for a zero depreciation bike insurance policy, here are some points which you should keep in mind –
- The zero depreciation cover is an add-on which is voluntary in nature. You can choose the cover if you want by paying an additional premium for the same.
- The add-on cover is available for bikes which are up to 5 years old. If your bike is older than five years, the cover would not be available.
- There are limits on the zero depreciation claims which you can make over the entire duration of your bike insurance policy. Usually, the benefit of zero depreciation add-on is allowed for up to 2 claims. These claims can be within the tenure of one policy or multiple policies. For instance, suppose you buy an annual zero depreciation policy on 1st January 2016 and make a claim in August. Thereafter, you make another claim in the year 2018. Once two claims have been made, albeit, in different policies, the coverage of zero depreciation add-on would stop. If in future years, any more claims are made, depreciation would be applied to the claim amount.
- Zero depreciation add-on is available only in comprehensive bike insurance policies. Third-party liability only plans do not have this cover.
Benefits of zero depreciation add-on:
A zero depreciation add-on is a very beneficial coverage to avail simply because the cover enhances the amount of claim. In the above example, if there is no zero depreciation cover, the insurance company pays only INR 15,250 towards a claim. However, if a zero depreciation cover is added, the claim amount would become INR 23,000. You, therefore, would not have to bear the cost of depreciation of your bike’s parts. Your out-of-pocket expenses would reduce and you would be able to save on the repair costs.
A comprehensive bike insurance policy is a must if you want an all-round protection for your bike. Moreover, when you add the zero depreciation add-on to the cover, it is like icing on the cake. You get an enhanced coverage which saves thousands on claims. So, opt for a zero depreciation cover and make your bike insurance policy more inclusive.
