Anything and everything around us loses value with time. The value of the bikes we drive depreciates because of the wear and tear. For the claim settlement also, insurers deduct the value of parts on the grounds of depreciation. This, in turn, becomes the cost to be borne by you for the repair of the vehicle. Hence, the buyers of the bike insurance policy started looking for zero depreciation products. Let us understand what is zero depreciation?
Zero Depreciation: Meaning and Application
When you do not want the reduction on the value of claim settlement amount, then it is understood that you are looking for Zero Depreciation. It implies that you pay an extra premium to increase the coverage under your Comprehensive Bike Insurance Policy. It comes as an add on benefit and is not included under the basic cover.
A Zero Depreciation based claim will reimburse you with full settlement amount without depreciation making a dent.
Let us consider that Ashok owned a bike insurance policy with Sum Insured Rs.95,000/-. He met with an accident in which his bike got damaged. The surveyor reported that the total cost of repairs after the accident amounts to Rs.15,000/- for the broken mudguard. The amount of settlement will be as below:
- Under the Comprehensive cover without Zero Depreciation add-on:
Claim Amount =Rs.15,000/-
Depreciation applicable = 50% will be applicable.
Reimbursement Amount =Rs.7,500/-
- Under the Comprehensive Cover with Zero Depreciation add-on:
Claim Amount =Rs.15,000/-
Depreciation applicable = Nil.
Reimbursement Amount =Rs.15,000/-
To extend the basic Comprehensive Bike Insurance Policy, you need to pay an extra premium which will be beneficial for you.
Difference between Comprehensive Cover with and without Zero Depreciation Add-on
|Comprehensive Cover without Zero Depreciation||Comprehensive Cover with Zero Depreciation|
|The premium paid is lower.||The premium paid to get the extension becomes higher.|
|The claim settlement is made after deductions applicable based on different parts.||It comes with full settlement coverage.|
Some of the benefits of buying a Zero Depreciation Cover include:
- It assures peace of mind for the future.
- There are no hidden costs of deductions at the time of the claim. It is because you are already paying for the add-on cover in the beginning.
- It reduces your pocket expenses at the time of claim.
- Buying Zero Depreciation cover is beneficial for the new bikes. As the vehicle gets old, the value of the parts already depreciates. Hence, it makes no sense in shelling extra money to get buy the supplement cover.
How to use a bike insurance calculator to calculate the premium of Zero Dep Bike Insurance?
You can calculate the insurance premium for your bike using the Bike Insurance Calculator. This is how the premium of your bike is calculated.
Imagine you own a Pulsar in September 2017. The policy for the bike was claim-free since the beginning. This year the renewal premium for Zero Dep Bike Insurance will be:
|IDV of the bike (Bajaj Pulsar) for 2019-20||Rs55000|
|No Claim Bonus for 2 years||Rs.148|
|Premium after NCB deduction||Rs.590|
|Third-Party Liability Premium||Rs.752|
|Compulsory Personal Accident Premium||Rs.295|
|Premium after GST||Rs.1931|
|Zero Depreciation @35% Of “Premium After NCB”||Rs.206|
|GST @18% on Zero Depreciation Premium||Rs.37|
|Total Premium Payable||Rs.2174|
We observe that the Zero Depreciation premium of Rs.243/- inclusive of GST is charged to increase the scope of cover under the basic bike insurance policy. In the absence of this protection, you could end up paying more for the repair of any part of the bike. Hence, if we look at the payment aspect, it is wise to get the insurance for Zero Depreciation when your bike is new.
With time, when the value of the bike decreases due to depreciation applied, the relevance of buying this add-on cover reduces. Bike Insurance Policy is to prevent you from spending money on repairs from your pocket that affects your savings.