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How IDV Affects at the Time of Bike Insurance Renewal

IDV in A Nutshell

To put in basic words, the Insurance Declared Value is an essential component of the coverage a bike insurance policy provides. It is a part of all motor policies but is even more critical when it comes to a two-wheeler. It is the maximum sum assured to the policyholder. It is fixed by the insurer and is equated to the market value of the motor vehicle. In short, it is the market value of the vehicle as it stands currently. In case of the vehicle suffering a total loss, the Insured Declared Value is the compensation that will be provided to the policyholder by the insurer.

The calculation of IDV may seem complicated to some, but once you understand it, you would be sure to fill the fair in your policy, during the bike insurance renewal. Insured’s declared value is evaluated as per the following formula- the manufacturer’s listed selling price subtracted by the amount of depreciation. Factors like the cost of insurance as well as the amount paid during registration are not a part of the Insured’s Declared Value either.  Then, there is an additional calculation of the IDV wherein a different price is taken out for the accessories. In case, the accessories are not factory fitted; then they require a separate calculation, and an extra cost is required for them just in case these parts are eligible for insurance. All of the factors mentioned above play a considerable role during a bike insurance renewal, and you should be aware of all of them in detail to get the right quote. When you place an inquiry for a renewal, you will get different quotes for the same; however, the value may not be worthy of what the vehicle’s current condition is and you may end up getting a much lower amount for the same during a bike insurance renewal.

So basically, the IDV is the ‘sum insured’ in the policy when issued. It forms a base amount for a while your vehicle is insured and then is used as the core for all the settlements for bikes and cars when needed. However, this comes into picture only when the complete condition of the vehicle is spoilt. Since it is equal to the value of the market price; the insurer is as a thumb rule(in most cases) required to take out the correct cost and give the policyholder the amount that the vehicle was worth. 

However, keeping a check on IDV also depends on the kind of policy you are taking. Even though, it is equally important in all types of policies, it is even more crucial when it comes to a comprehensive policy. While insuring your two wheeler or while getting a bike insurance renewal, you need to figure out the kind of risks that the policy covers. Firstly, the initial risk is associated with OD which stands for the own damage that the car may suffer and the second is the liability it has to the other party involved in the same. Now, in case of the third party damage that the policyholder is liable to- the price or the tariff is fixed by the law. However, in case of price that the insurer may bear for the policy holder in case the vehicle is damaged largely, the Insured’s Declared Value comes into picture.

IDV of a New Vehicle

During the initial phase of buying a new vehicle, the determination of the IDV is done on the following factors. It is determined on the basis of the listed selling price furnished by the manufacturer of the model and the brand of the concerned vehicle.  Now during bike insurance renewal, even the depreciation cost is taken into picture- hence you would need to speak to your agent and get the exact Insured’s Declared Value!

What is the IDV of the Vehicle Purchased Outside the Showroom?

Now this is when the depreciation starts to affect your vehicle. As soon as you take it out of the showroom, the price of the bike starts to fall. Since the depreciation factor kicks in, it affects the Insured’s Declared Value too. The entire value of the car falls by about 5% within the first six months of its purchase. After that, each year the car value keeps falling- which is something the insurers keep in mind while evaluating the Insured’s Declared Value during the subsequent bike insurance renewals.

Insured Declared Value Evaluated During Renewal

As mentioned above, the Insured’s Declared Value is largely the premium calculated keeping in mind the depreciation value of the vehicle currently. However, the owner has the liberty to give an IDV that he deems fit, especially during a bike insurance renewal or a car insurance renewal. The maximum limit that he can go upto however depends upon the policies set by the insurer and the cap varies as per the provider.

Claim Settlement Procedure, Especially in the Case of a High Insured’s Declared Value

To get the desired claim settlement, it is crucial that the insurer agrees to the IDV asked by you or you agree to the IDV cost evaluated by the insurer. There is no obstruction in the claim, provided both the parties are in mutual agreement for a higher IDV then what is expected from the usual calculations. If this has been agreed to mutually and is mentioned in the policy, then the insurer has no grounds to declare your claim null or void. However, even in such a case, if the insurer feels that there is a chance of a fraud to claim the IDV, then he may call for an investigation and then you would not get any claim if the case is found to be done for fraudulent purposes.

The Insured’s Declared Value in Case of Old Vehicles

In case your two wheeler is older than the period of five years or if the bike is a part of the obsolete models, then the value of this vehicle will be fixed based on various different criterias. The car insurance value is however fixed on the mutual agreement between the policyholder and the insurer. Now, the insurance company cannot deny you a renewal if the policy is running or not give you a third party cover. But at times, as a policyholder you may have some inhibitions if your vehicle is older than five years. In case of a bike insurance renewal, you may not have the liberty to zero depreciation features anymore or get extra benefits that you got initially, but since the third party cover is mandatory, you will get that for sure. The Insured declared value will be based on the age of the vehicle. Following are certain pointers to keep in mind for the IDV’s renewal:

  • Keeping the above mentioned pointers in mind, you need to assess the IDV very carefully. Do not just blindly agree to the terms and value set by your insurer without carefully looking into the correct value, especially during a bike insurance renewal.
  • You would also need to check the premium cost and see if it has been evaluated correctly or not, based on the IDV of the vehicle.
  • It is crucial to get the right coverage and you should be satisfied with the IDV since a bike is not a simple investment- it is an expensive one! So, if the values don’t look right to you or don’t appeal to you, ensure that you negotiate well to get the amount your deserve.
  • It is also crucial to remember that while renewing your bike insurance policy, the premium will be largely determined by the Insured’s Declared Value. If the market value equated to the IDV is very high, then you will end up paying a much higher premium as compared to a vehicle that costs lower.

Some insurance providers also give you the opportunity fix your IDV online and the right chance to get the IDV adjusted is during the bike insurance renewal or car insurance renewal, so ensure you get it done when there is a chance.

What to Do to Pick the Right Insurance Provider for the Right IDV

Different insurers end up putting different prices to get more consumers. So, what should you do as a consumer while renewing the bike insurance policy? In such a case, you need to first find out the premium that you would need to pay as well as the Insured’s Declared Value being offered by the insurer. After taking both of these factors in consideration only, you can decide the best policy fit for bike insurance renewal or car insurance renewal.

You may like to Read: What is IDV in two-wheeler insurance?

Consequences of a Low IDV Declared

In case, the IDV declared by you is lower than what the market value of the bike’s OD is then the only advantage you get is of a lower premium payment. The IDV evaluated is directly proportional to the bike’s OD premium. This basically implies that the lower the IDV derived of the vehicle, the lesser the payment of premium. This seems like quite an easy option and many may feel that it saves money for them. But, here is a big risk factor- because if your car goes through a major accident, then the money you will get in the claim would be quite low too. If you declare a really low IDV, then you will end up receiving a much lower claim resulting into higher expenses from your pocket in time of need.

Consequences of Declaring a Higher IDV

Since we have established that IDV is directly proportional to the premium paid, most people would deter from annoucing a high IDV because that would mean a much higher premium payment. Additionally, if we assume for a minute that maybe witha  higher IDV declaration, your claim amount will be much higher too, then you are mistaken. Firstly, the insurance companies are not sitting to lose any money and in case they do mutually agree to give you a higher IDV, there is a full inspection after the case of accident which might come under their legal purview and may result in you ending up with lower money.

In a nutshell, the Insured’s Declared Value is the entire amount of the sum assured which is promised by the company to compensate for the accidental damage. Hence, declaring a higher amount may end up delaying the entire process and you may have to bear the brunt of the same during time of need.

Pointers to Remember

So as major takeaways to remember about the IDV, especially during the your bike insurance renewal are:

  • You need to find an insurer that gives you the best close deal to the IDV matching to the current market value of your car.
  • Since, car is a depreciating asset- you would need to factor in the depreciation value while disclosing the Insured’s Declared Value
  • If you decrease the Insured’s Declared value, during the renewal, then you may get an advantage of lower premium payment, but you will end up spending a bomb during the accident since the coverage is directly proportional to the IDV.
  • If you declare a higher value in hope of getting higher coverage, your case maybe declared as fraudulent and you may have to suffer because of delay in claim or rejection in claim.

Ultimately, the IDV plays a very important role, especially during the bike insurance renewal or a car insurance renewal. Always declare the correct value; otherwise you may end up losing in the bargain of saving on the premium or in greed of a higher coverage. There are various insurers which provide great deals and would be able to advise you with the best option for you. Weigh all the options and then take a call, instead of just taking the first option that comes to you! It will help you save up a lot of money in the future and will help you get the right value for your vehicle.