If you are familiar with vehicle insurance, you must have definitely come across the term IDV. It is usually mentioned at the beginning of every two wheeler insurance quotation. IDV or Insured Declared Value plays a crucial role in two wheeler insurance.
An IDV is the maximum amount of money you can claim if your vehicle is damaged, lost or stolen within the policy period. In simpler terms, IDV is the current market value of your motorcycle minus the depreciation.
The premium you pay for your vehicle insurance is directly proportional to the IDV. Hence, IDV is one of the essential components of a two wheeler insurance plan.Let’s understand how IDV is calculated
How is IDV Calculated for Bike Insurance?
The insurer derives the IDV (Insured Declared Value) by deducting the depreciation from the manufacturer’s listed selling price. Depreciation is the calculated reduction in the value of an asset over a period of time.
Hence, as your two-wheeler gets older, the IDV decreases as well. Depreciation is especially crucial in the calculation of IDV for used vehicles.
The IDV for the accessories which are not original factory fitted is calculated separately if insurance is required for them. However, know that insurance and registration costs are excluded from IDV.
Additionally, the insurer also considers factors such as the location of registration, make and model, cubic capacity etc. while calculating the IDV of your vehicle. Cost against these factors is then adjusted with the standard depreciation rates as per Indian Motor Tariff.
Depreciation Rates for your Bike
Depreciation Rates after Five Years
The age of your vehicle is directly proportional to the depreciation rate. This means, the higher the age of the bike, the higher the rate of depreciation will be. For motorcycles that are five years old or more, the depreciation rate is calculated based on its serviceable condition and the state of its components.
In case the components are made of different materials, the Insured Declared Value (IDV) is calculated accordingly. However, the final IDV is computed as an overall average. For vehicles that are over five years or an outdated model, the final IDV is mutually decided between you (the policyholder) and the insurance company. But with add on covers such as zero depreciation bike insurance you can keep you two wheeler as good as new.
Factors Considered to Calculate IDV of Bike Insurance
As we all know, IDV depicts the market value of the bike. Hence, here are a few factors that are taken into consideration when calculating the IDV of bike insurance.
- The make and model of the bike – this includes the manufacturing year and the version of the bike
- The registration date of the bike
- The city of bike registration (can be different from your residential city)
- The kind of fuel the motorcycle consumes
- The age of the bike (when selling)
- The type of bike insurance policy
- The bike insurance policy period
What is the Significance of IDV in Bike Insurance?
The Insured Declared Value (IDV) is one of the essential components of any bike insurance plan. Not only it helps determine the market value of the bike, but also the amount you pay as bike insurance premiums.
- Determine the Actual Value of the Bike:
As we mentioned earlier, IDV allows the insurer to determine the market value of the bike. To calculate the IDV for the bike, various factors such as the make and the model of the bike, age of the bike, the cubic capacity, city of bike registration, and more. Your insurance provider will determine the IDV based on these factors, and hence you must provide correct information for the same.
- Determine the Bike Insurance Premiums:
The bike insurance premiums are based on factors such as the type of policy chosen, city of residency, cubic capacity of the bike, make and model of the bike, claim history, and the Insured Declared Value (IDV).
- Determine the Claim Amount:
Technically, IDV is also the highest amount you receive as compensation in case of damage or loss in unfortunate events. Many people state incorrect IDV, with a hope to lower the premiums. However, it backfires them when making a claim as they receive less compensation, and the amount might be insufficient to overcome the loss incurred.
If you also own a car, do read about what is IDV in car insurance to understand your car policy better.
What Happens to IDV When Renewing Bike Insurance?
When renewing your bike insurance, never agree to pay the premium blindly as per the insurance quotes. Always make it a point to check whether the IDV quoted in the policy justifies the premium charged by the insurance provider.
If the value of the IDV is not mentioned in the policy, get in touch with your insurer for the required details. It’s important to remember that the IDV impacts the premium of a comprehensive insurance policy.
Hence, one has to be careful not to understate or overstate the IDV; this would, in turn, be a hassle at the time of claim settlement.
A Final Thought
A bike can be your precious possession and a long-term investment. It is thus essential to declare the IDV correctly at the time of buying a bike insurance plan. If you don’t know the IDV of your bike, any insurance provider will calculate the IDV in accordance with the age of the bike and its model. This will help you avoid any further discrepancies.
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