Purchasing a bike is an exhilarating experience; the countless hours of research, test-rides, comparing various models and more. Be it your first bike or the third, the excitement never reduces, and you enjoy the process.
But riding a bike comes with its share of responsibility; to abide the laws and ride carefully. One such law that needs mandatory compliance is two wheeler insurance. It can be either third-party or comprehensive policy. Irrespective of the type of insurance plan you avail, IDV or Insured Declared Value comes into the picture.
So what is IDV?
IDV or insured declared value is the maximum amount which the insurance company pays in case of a total loss, damage beyond repair or theft of your vehicle. In simple terms, it is the approximate market value of your vehicle. You have the option to set the IDV of your policy within a specified range when you purchase a comprehensive policy. Moreover, the premiums of your policy are directly proportional to its IDV. Thus, it is a crucial factor when buying or renewing your bike insurance.
Impact of declaring a lower IDV
Since the IDV impacts your premium directly, many individuals tend to understate the IDV for reducing their premium. This way, you might be required to compensate for a lower claim amount when you need the assistance of your insurance plan. It means that if the expenses are higher then you, the insured, have to pay from your own pocket. This will not benefit you as you still need to pay even though you have an insurance cover.
How is Insured Declared Value (IDV) computed?
IDV, for a new vehicle, is calculated considering the selling price as listed by the manufacturer i.e. its ex-showroom price. This amount is adjusted each period for depreciation in each subsequent period. It excludes the registration and insurance cost. Some insurance companies offer coverage for accessories which aren’t originally included with the vehicle.
How do insurance companies account depreciation in calculating IDV?
Depreciation reduces the value of your bike over a period of time. The value of your motorcycle begins to decline the moment it leaves the showroom. Let’s look at the rates of depreciation for calculating IDV.
|Age of Vehicle||Depreciation rate for calculating IDV|
|Not more than 6 months||5%|
|More than 6 months but not more than 1 year||15%|
|More than 1 year but not more than 2 years||20%|
|More than 2 years but not more than 3 years||30%|
|More than 3 years but not more than 4 years||40%|
|More than 4 years but not more than 5 years||50%|
The table above provides a depreciation rate for vehicles up to 5 years of age. In contrast, the insured declared value for older vehicles is computed by a mutual agreement with the insurance company.
IDV is a crucial factor in determining the premium of your policy but not the only one. Selecting various add-ons can further impact your premium too. A two wheeler insurance premium calculator can help you assess the impact of the various factors that influence your premium. Make sure to check the two wheeler insurance price before making that final purchase and enjoy a hassle-free ride to your destination.