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What is IDV in two-wheeler insurance?
- DetailsWritten by PolicyBazaar -
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Modified 16 November 2016
What does IDV in insurance mean and how important is it? IDV stands for Insured Declared Value and the right IDV is crucial when purchasing two-wheeler insurance. Your two wheeler’s IDV influences how much reimbursement you’ll get towards repair/replacement expenses incurred by you.
In other words, IDV in insurance means maximum sum assured fixed by the insurance company, to compensate the policyholder with, in case of theft of his/her two-wheeler or its total loss due to an accident. In layman’s language, IDV in insurance means the current market value of a two wheeler.
Learn More About: Insured Declared Value (IDV)
IDV Calculator for Two Wheelers
The IDV calculator for two-wheelers is based on the manufacturer’s listed selling price for the two-wheeler proposed for insurance either at the start of the insurance policy or during policy renewal as the case may be, and then adjusted for depreciation (indicated in the table below).
Insurance and registration costs are excluded from the IDV. If insurance is required for accessories that are not factory-fitted, the IDV is separately calculated at an extra cost.
Rate of Depreciation on Two wheelers
Life of the two wheeler
Depreciation % to calculate IDV
Two wheeler not more than six months old
Over six months old, but less than one year
Over one year old, but less than two years
Over two years old, but less than three years
Over three years old, but less than four years
Over four years old, but less than five years
IDV Value for Two-Wheelers Aged Five Years and Above
The age of a two-wheeler is directly proportional to the rate of depreciation calculated – higher the age, higher the rate of depreciation, i.e. older the two wheeler, lesser the value.
For a two-wheeler that is five years old or more, its depreciated value is computed on the basis of its serviceable condition and the condition of its body parts. In case of different components made of different materials, the IDV is adjusted accordingly, and the two wheeler’s final IDV is determined as an overall average.
In case of a two wheeler older than five years or an obsolete model, the final IDV could be determined by a mutual agreement between the insurance company and the policyholder.
Some insurance companies follow the practice of getting surveyors to arrive at the correct IDV. This leads to an additional cost that the policyholder has to bear.
Significance of IDV
As discussed before, IDV is the amount of compensation the policyholder receives if his/her two-wheeler is either stolen or severely damaged due to an accident. Settling on a rational IDV value is, therefore, very important.
It is wise to get IDV closest to the two-wheeler’s market value. This ensures that in case of an accident or theft, the owner is compensated fairly and policyholder doesn’t suffer major losses. Sometimes, insurance companies may offer to bring down the IDV by about 5-10% - this percentage may be chosen by customer. In general, a lower IDV attracts a lower rate of premium and vice-versa.
The insurance company ultimately considers the age of the two-wheeler when a claim is filed. Hence, irrespective of a low or high IDV, the above information must be borne in mind before choosing a two wheeler’s insurance policy.
Consequences of Declaring Wrong IDV
When calculating IDV, either during first purchase or during policy renewal, the original purchase price of the two-wheeler is not considered. Instead, the current selling price of the two-wheeler’s particular brand and model is taken into consideration.
It is important to ensure that you do not declare an IDV for your two-wheeler lower than its rational market value. If you do so, and then make a total loss claim, you will most likely receive an amount lower than what you should actually be getting, because the declared IDV was lower.
Declaring a lower IDV in order to save a small amount on the premium makes no sense at all. Instead, it is wiser to declare the right IDV amount and save a substantial amount in the long run. Declaring the correct IDV ensures that you get the maximum fair amount if your two-wheeler is stolen or if you make a big claim.
Similarly, declaring a high IDV to be able to claim a higher amount is not recommended either. The same logic is applicable if you think that declaring a high IDV will fetch you a higher amount while selling the two-wheeler. This is because when the claim is processed, the two wheeler’s age is considered by the insurance company, before finalizing the claim; the depreciation that is calculated depends on this. You will therefore receive a low claim despite the high IDV declared.
It is therefore best to ensure that the IDV you declare for your two-wheeler is in sync with its model and age.
Wrapping it Up!
IDV is one of the most crucial factors that determine your two-wheeler’s insurance premium. A higher IDV attracts a higher rate of premium and vice-versa. It is, therefore, important to maintain a constant IDV when comparing quotes from different insurers, as this helps you choose the right policy for your two-wheeler.
Learning how to choose the right two-wheeler insurance policy with a good IDV also avoids unpleasant surprises when you file an insurance claim for your two-wheeler.
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