Understanding the two-wheeler insurance depreciation


02 Aug 2023

Rate of depreciation for two-wheeler insurance Policy

Are you worried about your two-wheeler insurance price? But did you know that depreciation can significantly affect the cost of your two-wheeler insurance policy? Here, we'll understand the rate of depreciation for two-wheeler insurance, what IDV is, how it's calculated, and the factors affecting the bike insurance price.

What is the rate of depreciation for two-wheeler insurance?

The depreciation rate for two-wheeler insurance depends on the age of the vehicle. Generally, the rate of depreciation increases as the vehicle gets older. For example, the depreciation rate for a new vehicle (less than six months old) may be 0%, while the rate for more than five years old may be as high as 50%. The insurance company typically provides specific depreciation rates for different age groups in their policy documents.

What is the insured declared value (IDV)?

When it comes to two-wheeler insurance, the insured declared value (IDV) plays a crucial role in determining your two-wheeler insurance price. IDV is the maximum amount an insurance company will pay in the event of a total loss or theft of your two-wheeler. It's calculated based on the manufacturer's listed selling price of the vehicle minus depreciation. The IDV represents the current market value of your two-wheeler.

How to calculate the IDV of your two-wheeler?

To calculate the IDV of your two-wheeler, the insurance company takes into account the manufacturer's listed selling price of the vehicle (as per the latest price list issued by the company). Then it deducts the depreciation that has occurred due to the age and usage of the vehicle. The rate of depreciation applied is specified by the Indian Motor Tariff, a set of guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI).

Factors affecting bike insurance prices in India

1. Type of Bike: The make and model of the bike are the significant factors that affect the two-wheeler insurance price in India. Luxury and sports bikes usually have higher insurance costs than regular bikes.

2. Cubic Capacity: The bike's cubic capacity is another important factor affecting the two-wheeler insurance price. Bikes with a higher cubic capacity are more expensive to insure.

3. Age of Bike: The bike's age is also considered when determining the two-wheeler insurance price. Older bikes are considered riskier to insure and therefore have higher insurance costs.

4. Insurance Coverage: The type of coverage selected also affects the two-wheeler insurance price. Comprehensive coverage, including third-party liability, personal accident cover, and own damage cover, is more expensive than third-party liability coverage.

5. No Claim Bonus: The no-claim bonus (NCB) is a discount on the two-wheeler insurance given to policyholders who have not made any claims in the previous year. The higher the NCB, the lower the insurance costs will be.

The price of your two-wheeler insurance policy can be affected by the factors mentioned above. It's essential to understand the rate of depreciation and the concept of IDV when calculating the market value of your two-wheeler. It's advisable to compare different policies and their prices from various insurance providers to get the best deal on your two-wheeler insurance.

Always understand the policy's terms & conditions and select the one that suits your requirements and budget. By keeping in mind these factors, you can get the best two-wheeler insurance price for your vehicle.

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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.