How Depreciation Affects The Cost Of Two Wheeler Insurance


16 May 2022

Read more about how depreciation affects the cost of the two-wheeler insurance policy. Check out the bike insurance policy online on Kotak General Insurance.

When you buy a bike insurance policy, you must be aware of the different components that affect the premium amount. One such critical factor is the depreciation value, which is computed based on the IDV (Insured Declared Value).

What is depreciation and how does it work?

In simple terms depreciation is the wear and tear of the asset over time. When you use your bike, over a period, its various parts, including engine, tyre, etc., undergoes wear and tear and their value reduces. In bike insurance, the depreciation is calculated using the IDV, which is the estimated market value of the bike based on the brand, model, and manufacturing year of the bike.

The IDV is the maximum amount that the insurance company will pay if your bike is damaged beyond repair or is stolen and cannot be traced. The higher the IDV, the higher will the insurance premium. On the other hand, the more your IDV depreciates over time, the cheaper your bike premium will be as it represents the decreased value of your bike and the insurer will have to pay a smaller amount when you raise a claim.

If you have met with a minor accident and raise a claim to replace a few parts of your two-wheeler, the insurance company will compensate as per the IDV, which will include the depreciation factor, rather than the actual replacement cost. This means you must bear the difference in the compensation provided by the insurance cost if the actual repair is higher. Depreciation in bike insurance policy is always detrimental to your finances.

Now that you know what depreciation is and how it affects the bike insurance premium, let us look at how the insurance company calculates the insured declared value of your two-wheeler.

While computing the IDV of your bike, the insurance companies generally use the following depreciation schedule.

Age of the Bike

Depreciation Rate

More than six months but less than one year


Six months to one year


One – two years


Two – three years


Three – Four years


Four – Five years


The above table clearly shows that the older your bike gets, the higher the depreciation rate.

What is a zero-depreciation rider?

Riders or add-ons are additional coverage options that you can voluntarily purchase by paying an additional premium to extend the coverage of your standard policy and get additional financial protection. When you buy a bike insurance policy, you can consider several add-ons, one such useful rider is the zero-depreciation rider.

As the name suggests, a zero-depreciation add-on cover allows you to get full compensation for repairs or replacement of the damaged bike parts during the claim settlement process. So, irrespective of how old your bike is, if you need to get a part replaced, the insurer will pay the full replacement cost.

Final Word

Thus, depreciation has a significant impact on the two-wheeler insurance cost. Hence, it is paramount that you maintain your bike well so that it retains its value over time and the premium remains affordable. If you are looking for the best bike insurance policy at an affordable premium and extensive benefits, you can consider buying the Kotak Long Term Two Wheeler Secure bike insurance from Kotak General Insurance. Visit our website to know more about the policy.

Team Kotak GIC

The content of this blog has been created and carefully reviewed by the esteemed team at Kotak General Insurance, with the sole purpose of providing valuable guidance and sharing insights on the importance of general insurance. Our objective is to assist users in making informed decisions when purchasing or renewing insurance policies for their cars, bikes, and health. Our expertly curated information aims to empower our readers with the knowledge they need to protect their valuable assets and financial interests.