When you are looking at buying a bike insurance policy, you need to consider many factors like the type of cover you need, add-ons, bike insurance premium rate, and the Insured Declared Value (IDV). As the name suggests, IDV is the insurance value of the vehicle. Today, we are going to talk about IDV and offer a detailed guide to help you understand IDV and how you can use it to get the right insurance policy for your car.
What is IDV?
In simple terms, IDV is the market value of your car. It is the maximum amount of claim you can get if your car is stolen or damaged beyond repairs. This makes IDV an essential component of the insurance policy and declaring the correct amount is essential to receive the maximum claim amount. Since this is the maximum sum assured determined by the insurer, understanding how it is calculated is essential to ensure that the insurer is offering adequate compensation on the policy.
How is IDV calculated?
The formula to calculate IDV is as follows:
IDV = (The listed selling price – depreciation) + (Accessories that are not listed – depreciation)
This excludes the registration, taxes, and insurance costs.
In other words, IDV is the total value of your car (selling price + accessories) minus depreciation. Hence, to arrive at the IDV, you need to understand depreciation rates. Here is a chart of depreciation rates provided by the Indian Motor Tariff:
|Age of the bike||Depreciation rates|
|0 – 6 months||5%|
|6 months – 1 year||15%|
|1 year – 2 years||20%|
|2 years – 3 years||30%|
|3 years – 4 years||40%|
|4 years – 5 years||50%|
|5 years and more||Decided by the insurer|
Hence, when you purchase a new vehicle, the applicable IDV is 95% of the manufacturer’s listed selling price. As the vehicle ages, its IDV drops, and so does the sum assured of the two-wheeler insurance policy. If the bike is between four and five years old, the IDV will be 50% of the bike manufacturer’s listing price. If the bike is more than five years old, the insurer will determine the IDV based on the condition of your two-wheeler. You can also use a bike insurance calculator provided by many insurers to get an estimate.
Significance of IDV in bike insurance
The Insured Declared Value or IDV of your bike is important because –
- It is the optimum value of your two-wheeler. Since it is calculated taking into consideration the age, make, model, and depreciation, it is the accurate depiction of how much your bike is worth. Hence, insurance companies offer coverage for the said amount.
- The premium of your bike insurance policy depends on a range of factors, including the type of policy purchased by you, your geographical location, the cubic capacity of your two-wheeler, your claims history, and the IDV of your vehicle.
- Since IDV is the maximum sum assured, it is the maximum amount that you can receive if your bike is stolen or damaged beyond repairs. Hence, many bike owners try to buy a policy that offers the highest IDV. However, it is important to remember that higher IDV also implies a higher premium. On the other hand, if you are trying to reduce the premium by choosing a policy with the lowest IDV, then at the time of filing a claim, you will receive a lesser amount.
- When you renew your policy, don’t pay the premium blindly. Ensure that you check if the IDV specified in the policy document is at par with the premium quoted by the insurer.
Remember, a bike insurance policy is a long-term investment. Therefore, it is important to ensure that the policy has the right IDV mentioned in it. It should be in accordance with the make and model of the bike and its age. This can help avoid any discrepancies at the time of claim settlement. When you go online to check bike insurance, ensure that you pay attention to the IDV calculation by the insurance company. This will help you understand the extent of own-damage coverage and the premium rate. If you think that the insurer has calculated the IDV higher or lower than it should be, then you need to carefully assess if it suits your requirements. Research well and consider all options and buy the policy that is best suited to your needs. Good Luck!