There are several jargons that you are bound to come across when buying a bike insurance policy. One such term is the IDV which stands for Insured Declared Value. This is one of the most important aspects you need to keep in mind before purchasing a two-wheeler insurance policy.
Let us find out what the IDV is and why it is important.
To know why you need to consider the IDV while buying a bike insurance policy, you need to understand its basic concept. The IDV is the maximum amount of money that an insurance company will be paying the policyholder in case of theft or total damage to the two-wheeler. This would be the highest amount that the insurance company would pay in case you need to make a claim. As you would want to get the most out of your motor insurance coverage, the IDV is definitely a figure of extreme importance.
How is the IDV calculated?
When you are looking to buy or renew a bike insurance policy, the IDV of your bike will generally be calculated by adjusting the standard rate of depreciation with the manufacturer’s market value of the bike. These are the factors that insurance companies consider while calculating the IDV:
- Bike registration details
- Model of the vehicle
- Vehicle description
- City in which the vehicle is registered
- Manufacturer
- Ex-showroom price
Standard rates of depreciation:
| Bike’s tenure | Depreciation rate |
| 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% |
Do bear in mind that road tax, costs of insurance, and costs of vehicle registration are not included while calculating the IDV.
IDV affects the premium of your bike insurance policy
Premiums for bike insurance policies are directly proportional to the IDV. Here’s how:
Lower IDV – Lower premium
By declaring a lower IDV, you can save on your bike insurance premium. However, you should keep in mind that your claim compensation would total a lesser amount since your IDV sum is low. Keeping adequate compensation in mind, you should be careful about choosing an accurate IDV so as to get good coverage and get affordable premiums.
Higher IDV – Higher premium
You would get better compensation when you declare a higher IDV. However, you should be careful about not overestimating the market value of your bike since it will unnecessarily hike your policy premium.
Here’s what you should keep in mind!
A lot of policyholders understate the IDV of their motor vehicles. They do this to decrease the premiums of their bike insurance policies. However, this is not an advisable option since the insurance coverage would be quite less. If your bike unfortunately suffers from total loss in an accident, you would end up receiving far less than the vehicle is worth. This does not mean that you should overstate your IDV just to get an increased cover in case you have to make a claim. A higher IDV is not going to get you a better price when you decide to sell your bike.
We hope that this article has been informative.
