What is IDV in Two-Wheeler Insurance?
If you are buying or renewing a two-wheeler policy, one term you will frequently come across is IDV in bike insurance. Understanding IDV is essential because it directly affects both your premium and your claim amount. IDV (Insured Declared Value) is the current market value of your bike, and it represents the maximum amount your insurer will pay in case of theft or total loss. In simple terms, if you are wondering what is IDV in insurance for bike, it is the sum insured of your two-wheeler. Read ahead to know to understand what IDV is in bike insurance.
Why is IDV Important in Two-Wheeler Insurance?
The IDV in two-wheeler insurance plays a crucial role in determining your bike insurance premium and deciding your claim payout amount. Moreover, it ensure fair compensation in case of theft or total loss. Therefore, having the best IDV for bike insurance ensures that you are neither underinsured nor overpaying for your policy.
How to Calculate IDV of Bike?
IDV calculator for bikes is a time-saving online calculator tool offered by different insurers. An IDV of the bike depends upon the listed selling price declared by the manufacturer. It is calculated at the beginning of the policy term or during policy renewal and then adjusted with depreciation. With an IDV calculator, you can determine the market value and the right premium for your two wheeler insurance. If you want to insure accessories that are not factory-fitted, the IDV is separately calculated by your insurer at an extra cost. Make sure you inform your bike insurer on time. Additionally, the IDV calculator for the bike also determines the right claim payout amount when the cost of repairing damages is more than 75% of the sum insured (IDV) or stolen.
IDV Calculation Formula
*MRP of the bike refers to the listed ex-showroom price by the manufacturer
*Depreciation as per the industry standard
Understanding the Rate of Depreciation on Bike
Depreciation in bike insurance is another term that is frequently used while calculating the premium amount. It is also a key player to decide the IDV and the premium payable. With time, the value of the vehicle decreases. As a result, the depreciation is adjusted while calculating your payout amount. Here is a table showing the depreciation percentage as per the Indian Motor Tariff:
| Life of the Two-Wheeler | Depreciation % to Calculate IDV |
|---|---|
| Two-wheeler not more than six months old | 5% |
| Over six months old, but less than one year | 15% |
| Over one year old, but less than two years | 20% |
| Over two years old, but less than three years | 30% |
| Over three years old, but less than four years | 40% |
| Over four years old, but less than five years | 50% |
IDV for Bikes Older Than 5 Years
The age of a two-wheeler is directly proportional to the rate of depreciation calculated - the higher the age of vehicle, the higher the rate of depreciation, i.e. older the two-wheeler, the lesser the value. For a two-wheeler that is five years old or more, its depreciated value is computed based on its serviceable condition and the condition of the vehicle's body parts. In the 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 in insurance. This leads to an additional cost that the policyholder has to bear.
Factors Affecting IDV in Bike Insurance
The Insured Declared Value (IDV) of a bike depends on factors such as its age, make, model, variant, and current market value. Depreciation also reduces the IDV as the bike gets older. Accessories and modifications may also affect the final IDV.
The IDV value of a bike depends on several factors, such as:
Consequences of Choosing the Wrong IDV
IDV of your bike directly impacts the premium of your bike insurance policy. If you are thinking to decrease the IDV, it will lead to the following consequences: This will reduce the sum insured, and the claim amount will be lower in case of a total loss of the vehicle. If the cost of repairing the accidental damage is higher, you will have to compensate for it from your pocket. Overall, you will suffer a huge loss due to the lower claim amount. However, if you increase the IDV, you will have to bear the following consequences: This will increase your bike insurance premium. By doing so, you might not able to raise a claim for a total loss. Therefore, it is important to declare the right IDV of your bike. You can start this by researching thoroughly before buying a two-wheeler insurance policy. Start this by visiting a few websites that offer used or second-hand two-wheelers for sale to check the current market of those vehicles. By this, you will get an idea to set an approximate IDV of your bike.
Significance of IDV in Bike Insurance
As discussed before, the IDV of a bike means the amount of compensation the policyholder receives in case of an unforeseen event. It is wise to get IDV closest to the bike's market value. This ensures that if an accident happens or the insured vehicle is stolen, the owner is compensated fairly enough, and they do not have to suffer a major loss. Sometimes, general insurance companies may offer to bring down the IDV by about 5-10%. However, this percentage may be chosen by the customer. Hence, a lower IDV value means a lower rate of premium and vice-versa.
When is IDV Applicable in Claims?
The IDV in bike insurance is applicable in case of theft of the bike, total loss (accidental damage beyond repair), and constructive total loss (accidental damage repair cost is more than 75% of IDV). In such cases, the insurer pays the full IDV amount to the policyholder (after deductibles).
Pro Tips to Choose the Right IDV
FAQs – IDV in Bike Insurance
-
Q. Does IDV matter in bike insurance?
Ans. Yes, IDV matters the most in bike insurance because it determines both your premium and maximum claim amount in case of theft or total loss. -
Q. How to calculate 2-wheeler IDV?
Ans. IDV is calculated as ex-showroom price minus depreciation, based on the bike’s age. -
Q. Is it good to have higher IDV?
Ans. A higher IDV gives better claim value but also increases your premium. That is why is important to choose right IDV instead of higher or lower IDV. -
Q. What happens if IDV is too high?
Ans. You will pay a higher premium without getting extra claim benefits beyond its value will be higher than the actual market value. -
Q. Which type of 2 wheeler insurance is best?
Ans. Comprehensive bike insurance is best as it covers both third-party liabilities and own damage. -
Q. What is the IDV after 1 year?
Ans. After 1 year, IDV typically reduces by 10% due to depreciation. -
Q. What if my bike is stolen with low IDV?
Ans. You will receive a lower claim amount, which may not fully cover your bike’s actual value. -
Q. How is IDV calculated for a bike?
Ans. It is calculated using the current market value after applying depreciation. -
Q. Is higher IDV always better?
Ans. Not always. It increases premium, so the best IDV is one close to market value. -
Q. How much is 1 year bike insurance?
Ans. 1-year bike insurance depends on factors like bike model, age, type of coverage, etc. -
Q. Is it necessary to reduce IDV by 10%?
Ans. No, it is optional. Reducing IDV lowers premium but also reduces claim amount. -
Q. Why is my IDV so low?
Ans. IDV decreases due to depreciation, bike age, and market value decline. -
Q. Which IDV is best?
Ans. The best IDV is close to your bike’s current market value for balanced premium and coverage.
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