What is IDV in Two Wheeler Insurance? - Explained

IDV stands for Insured Declared Value and is one of the many key factors that establish the premium that you’re required to pay for your two-wheeler insurance plan. The Insured Declared Value makes use of multiple variables like the age of the vehicle, the type of fuel it uses, the area of registration, as well as the model or brand of the bike.

Understanding IDV in bike insurance is vital if you are planning to purchase a two-wheeler insurance plan in the near future. 

In short, the Insured Declared Value is the amount that the vehicle owner can claim for reimbursement against any damage or loss caused to the insured two-wheeler.

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What is IDV in Two Wheeler Insurance? - Explained

IDV stands for Insured Declared Value and is one of the many key factors that establish the premium that you’re required to pay for your two-wheeler insurance plan. The Insured Declared Value makes use of multiple variables like the age of the vehicle, the type of fuel it uses, the area of registration, as well as the model or brand of the bike.

 

Understanding IDV in bike insurance is vital if you are planning to purchase a two-wheeler insurance plan shortly. 

In short, the Insured Declared Value is the amount that the vehicle owner can claim for reimbursement against any damage or loss caused to the insured two-wheeler.

IDV in Two Wheeler in Insurance

If you’re planning to purchase a two-wheeler insurance plan shortly, then you need to know what IDV means in bike insurance.

 

IDV stands for Insured Declared Value and is one of the many crucial factors that determine the premium that you’re required to pay for your two-wheeler insurance plan. The IDV is the present market value of your bike and is arrived at after accounting for depreciation.

 

The Insured Declared Value is the maximum amount of compensation that you can avail yourself of from a bike insurance provider in the case of total loss, theft, and damage to your bike.

Rate of Depreciation in Two-Wheelers

Check out the two-wheeler depreciation rate to understand the IDV in bike insurance calculation by the insurance companies in the table below -

Vehicle Age

Depreciation Rate 

Up to 6 months old

5%

Between 6 -12 months of age

15%

Between 12 -24 months of age

20%

Between 24 - 36 months of age

30%

Above 3 years, but below 4 years of age

40%

Above 4 years, but below 5 years of age

50%

How Is IDV Calculated for Bike Insurance?

Now that you’ve been apprised of what IDV is in bike insurance, let’s take a look at how it is calculated. This way, you can get a much better understanding of the concept. Check out the table below for more information on the depreciation rates used in IDV calculations.

Age of the Two-wheeler

Depreciation Rate for IDV Calculation

Less than or equal to 6 months old

5%

Between 6 months to 1 year

15%

Between 1 year to 2 years

20%

Between 2 years to 3 years

30%

Between 3 years to 4 years

40%

Between 4 years to 5 years

50%

Here’s an example to help you understand the calculation of IDV value of a bike that’s 2.5 years old.

Assume that you own a Yamaha FZ S FI motorcycle that you bought 2.5 years ago. At the time of purchase, the price of the bike was Rs. 1.25 lakhs. What would be the IDV value for the bike now?

 

Since the bike is 2.5 years old, the depreciation rate applicable to it would be 30%. To find out the IDV for your bike, you would have to subtract the depreciated value from the original purchase price. Let’s take a look at how it is done.

 

IDV = Purchase price - 30% of purchase price

 

IDV = Rs. 1.25 lakhs - 30% of Rs. 1.25 lakhs = Rs. 87,500

 

As you can see, the current IDV of your Yamaha FZ S FI motorcycle is Rs. 87,500.

What is the IDV in two-wheeler insurance for bikes that are above 5 years old?

The depreciation table that you saw above has been rated only for vehicles that are up to 5 years old. In the case of a bike that’s older than 5 years, the method of calculation of IDV tends to change.

 

The IDV for such motorbikes is calculated based on factors such as the state of its components and the serviceable condition of the vehicle. The IDV of the bike is also dependent on the materials from which its components are made.

 

For bikes that are older than 5 years, the final IDV is mutually agreed upon by you and the insurance provider.

Factors That Help Determine IDV in Bike Insurance

It is not enough to just know what bike insurance IDV means. You should also be aware of the various factors that are taken into consideration when determining the value. Here are a few of the most important factors that you should know.

1. The Make and Model of the Bike -

 One of the main factors considered for IDV calculation is the make and model of your bike. The more expensive your bike is, the higher its IDV is likely to be.

2. The Age of the Bike - 

This is another major factor that’s taken into account for the calculation of your bike IDV. The older your bike is, the lower the IDV value for the bike is likely to be.

3. The Type of Fuel the Bike Uses - 

The IDV of a bike tends to vary depending on whether it runs on petrol or is battery-powered.

4. The Area of Registration of the Bike- 

Depending on where your bike is registered - metropolitan cities or rural areas, the IDV for your bike can vary significantly.

Impact of IDV on Two-wheeler Insurance Premium

IDV is one of the crucial elements in evaluating the premium of the policy as well as the claim settlement amount to the policyholder. IDV determines the value of the two-wheeler during the policy purchase. The higher the IDV declared by the policyholder, the pricey the premium amount becomes.

 

It is advisable to quote the realistic IDV and not a lower value, as it may create issues during the claim procedure. In situations, where the policyholder has intentionally quoted lower IDV in bike insurance to save on premium amount, they might end up paying lump-sum amounts from their pockets for the loss/ damage in the vehicle as the insurance company will release the claim amount as per the IDV mentioned in the policy.

What Is the Significance of IDV in Bike Insurance?

The Insured Declared Value is one of the most important aspects of a bike insurance policy. Its importance and significance are highly misunderstood. Here’s how crucial the IDV is for a bike insurance plan.

1. It is an Estimate of the Current Market Value of the Bike -

The Insured Declared Value of a bike helps the insurance provider determine the current market value of the vehicle. Therefore, it is always advisable to provide the right IDV when purchasing a bike insurance plan.

2. It Determines the Bike Insurance Premium -

 The IDV is one of the many factors used in the determination of bike insurance premiums. And so, the lower the IDV you declare, the lower the premiums are likely to be. However, doing so can severely limit the amount of coverage that you receive from the insurance plan and is not advisable.

3. It Decides the Amount of Claim -

 As you’ve seen above, the IDV is the amount that you receive from the insurance provider as compensation for events such as damage, total loss, or theft of your bike. So, it is always a good idea to declare accurate IDV values for your motorcycle to ensure complete and comprehensive coverage.

Consequences of Declaring Wrong IDV

The declaration of the IDV in bike insurance is beneficial for the policyholders to get a fair compensation amount during claim settlement from the insurance companies, however, there are times when policyholders declare the wrong IDV either to save some on premium payments or to avail extra fund assistance during claim assistance.

 

 The wrong IDV declaration will lead to the loss of the policyholder -

 

  • Quoting a lower IDV of the two-wheeler during the policy purchase or renewal, will lower the compensation amount in a claim settlement. The policyholder will have to then personally pay the remaining repairing charges.

  • Quoting a higher IDV of the two-wheeler during the policy purchase or renewal, intending to get a higher compensation amount in a claim settlement is also a failed attempt. Insurance companies will evaluate every aspect during the claim procedure and will not blindly release the amount by only taking declared IDV into consideration. In such a scenario, the policyholder will get a fair amount from the insurance company in claim settlement irrespective of making pricey premium payments.

Wrapping it up

Now that you’re fully aware of what IDV is in bike insurance and its importance, make sure to declare the right value for your bike at the time of purchase or renewal. This way, you can ensure that the insurance policy covers the loss that you sustain more comprehensively.

 

Whether your insurance plan is up for renewal or looking to purchase one for your new motorcycle, Bajaj MARKETS can help you make the right decision. Thanks to the plethora of different bike insurance plans available on the website, you can take your time comparing them with one another. And once you’ve made your decision, you can simply proceed to purchase it online within just a few minutes.

Check Out Bike Insurance Plans Available at Bajaj MARKETS

FAQs

  • ✔️Can you manually declare the IDV in a bike insurance plan?

     Yes. You can manually customise the IDV for your bike at the time of purchasing a two-wheeler insurance plan.  

  • ✔️What is the maximum IDV in two-wheeler insurance that you can opt for?

     The maximum IDV that you can opt for your bike is dependent on various factors such as the age, the make, and the model of your bike. It also depends on the insurance provider that you opt for.  

  • ✔️Can I opt for a lower IDV for my bike?

     Yes. You can choose to lower the IDV for your bike. However, it is not recommended since you would get a lower compensation in the event of damage, theft, or loss to your bike.   

  • ✔️Why does the IDV in bike insurance decrease every year?

     Depreciation is the primary reason why the IDV decreases each year. Depreciation is the loss of value of a bike due to normal wear and tear.  

  • ✔️Is the concept of IDV applicable for third-party bike insurance policies?

    No. Since third-party bike insurance policies only cover third-party liabilities, the concept of IDV does not apply to it. On the other hand, IDV is only applicable for Own Damage (OD) covers.

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