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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 uses multiple variables like the age of the vehicle, model, registration location, etc. 

 

According to the Motor Vehicles Act, it is mandatory to get your vehicle insured. Insurance is vital if you are planning to purchase a two-wheeler insurance plan soon. 

How Is IDV Calculated for Bike Insurance?

Now that you know 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 ₹1.25 Lakhs. What would be the IDV value for the bike now?

 

Since the bike is 2.5 years old, its depreciation rate 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 = ₹1.25 Lakhs - 30% of ₹1.25 Lakhs = ₹87,500

 

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

Rate of Depreciation in Bike Insurance

The value of a two-wheeler depreciates every year, with the age of the vehicle. Insurance companies consider depreciation value upon IDV declaration made by the policyholder during policy renewal. The rate of depreciation in bike insurance plays a crucial role during premium payments and claim settlement procedures.

 

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%

**Note - The rate of depreciation and IDV in bike insurance depends upon the norms and policies of the insurance companies. 

Importance of IDV Calculator for Two-wheeler Insurance

The IDV calculator is a crucial tool when it comes to choosing the right two-wheeler insurance. While making such calculations, you must keep in mind the fact that your values and information must always remain true and accurate. Even the slightest discrepancy can alter your IDV, insurance premium price, coverage, and claim settlement. 

 

Here’s how calculating your IDV can be very helpful to you.

  • Calculating your IDV can make you aware of multiple aspects surrounding your financial future. 

  • You can learn about your bike’s market value. 

  • The calculator can help you estimate the premium price you might have to pay for your bike insurance. 

  • You can understand the extent of coverage you can claim in the event of total loss through theft, 70% damage (or more) of your vehicle, etc. 

Advantages and Disadvantages of IDV Calculator for Two-wheeler Insurance

Declaring a high or low IDV will have its good and bad consequences on similar degrees. Here’s what those consequences could look like.

Insured Declared Value

Advantage

Disadvantage

Low IDV

A lower premium

Lower sum insured

High IDV

Higher assured sum in the event of total loss or theft

A higher premium

Factors that affect Insured Declared Value

The Insured Declared Value is one of the most important aspects of a bike insurance policy. Its importance and significance are highly misunderstood. The IDV in bike insurance is influenced by various factors like model age, usage, etc. 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. Hence, 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. Therefore, it is always a good idea to declare accurate IDV values for your motorcycle to ensure complete and comprehensive coverage.

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What Is the Importance of IDV in Two-wheeler Insurance?

The insured declared value of your two-wheeler is very important when it comes to purchasing or renewing your bike insurance. Given below are all the reasons why your best IDV for bike insurance is very crucial. 

  • It determines the maximum amount the insurance company will be willing to pay you in case of total loss

  • It helps you make a sound and informed decision regarding your bike insurance renewal or application

  • It contributes to determining the premium price you might have to pay for your bike insurance

  • It makes sure that the compensation you receive for total loss or theft of your bike is just and fair

Impact of IDV on Two-wheeler Insurance Premium

IDV is one of the crucial elements in evaluating the premium of the policy and the claim settlement amount. IDV determines the value of the two-wheeler during the policy purchase. The higher the IDV declared by the policyholder, the higher the premium amount will be.

 

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

Insured Declared Value During Insurance Policy Renewal

The IDV in bike insurance is determined and updated in the records during insurance policy renewal. The applicable depreciation value will be deducted from the existing IDV. A new IDV will be derived to determine the premium payment amount during the insurance policy renewal.

 

The policyholder must check the proposed IDV and premium payment amounts by evaluating the market price of their two-wheeler. In case, the policyholder is not satisfied with the proposed values, the policyholder can ask the insurance company to revise it as per the market. IRDAI offers a 15% plus/minus window for the policyholder, to negotiate the IDV and come to a mutual agreement. The policyholder can also browse policy plans offered by other insurance companies for their vehicles.

What Is the IDV in Two-wheeler Insurance for Bikes That Are above 5 Years Old?

In the case of a bike that’s older than 5 years, the method of calculation of IDV tends to change, as compared to the calculations of vehicles that are not older than five years. 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.

Difference Between IDV and Premium Rates

It is okay to be confused between the concepts of IDVs and premium prices. While both are widely different concepts, they are related. After all, the IDV of your bike determines the price of your bike insurance premium. Hence, here’s all that makes the two of these factors different and related at the same time. 

Insured Declared Value

Premium Rate

Market value of a two-wheeler vehicle

Price paid for a bike insurance policy

High IDV

High premium price

Low IDV

Low premium price

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 the IDV of your bike. 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.

5. Insurance Policy Plan

The IDV is also determined by the type of insurance policy plan purchased by the vehicle owner and the terms and conditions associated with it. 

6. Market Value

Apart from depreciation, the market value also plays a crucial role in determining IDV in bike insurance. If the market value of the bike is higher than the proposed IDV by the insurance company, the insurer is liable to negotiate and come to a mutual agreement with the policyholder.

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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 get extra fund assistance during claim assistance.

 

The wrong IDV declaration will lead to the loss of the policyholder in the following ways. 

  • 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 repair 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, you know that declaring the right value for your bike is crucial. 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. Once you’ve made your decision, you can simply proceed to purchase it online within just a few minutes.

Frequently Asked Questions About IDV in Two-wheeler Insurance

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. These factors include 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 to third-party bike insurance policies?

No, it is not. 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.

What will be the IDV of a new Bike?

The IDV in bike insurance for new or old bikes is determined by taking various factors into consideration like a model, bike’s showroom price, geographical location, etc.

Is choosing a high IDV a good idea?

Choosing a high IDV leads to higher premium payments by the policyholder. Policyholders assume that paying a higher IDV will also offer higher coverage during claim settlement, but it is not true. Insurance companies take the market value of the bike into consideration and disburse the claim amount accordingly. Therefore, it is advisable to quote the ideal IDV in bike insurance.

What is a Bike's IDV outside of a showroom?

Generally, a bike outside of a showroom, with less than six months of age, can have an IDV of 95% of the ex-showroom price. However, the IDV in bike insurance percentage might differ due to the norms and policies of the insurance companies.

Why is it crucial to declare the right IDV?

It is crucial to declare the right IDV to get optimum coverage during claim settlement. Quoting a lower IDV in bike insurance can lead to minimal compensation during claim settlement. If one quotes high IDV in bike insurance, they will end up paying a high premium amount and will get coverage as per the market value of the bike.

Can I increase the IDV value of my bike?

Yes, one can increase the IDV value in bike insurance. The insurance companies evaluate and determine the IDV of a bike. The policyholder has the right to increase or decrease the IDV in bike insurance as per their comfort and financial goals.

What happens in case I opt for a lower IDV in two-wheeler insurance?

If you choose a lower IDV, the premium price of your bike insurance will decrease significantly. While it can help you save some amount from your premium price, it leads to a lower sum insured. Hence, with a low IDV, you can expect a lower premium price and a low compensation upon total loss or theft.

What happens in case I opt for a higher IDV in bike insurance?

Should you choose a higher insured declared value, you must prepare yourself to pay a higher premium price. However, while this could seem like a disadvantage, the sum insured will also increase along with the premium. This invites a higher compensation payable by the insurance company in the event of the total loss or theft of your insured bike. 

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