Buying a bike involves a lot of research; those countless hours you invest in searching the right bike, churning out maximum power figures, and best-in-class technology; all within your budget. While this may shoulder a responsibility to ride carefully, another form of protection you must avail is by way of insurance. It can be either a comprehensive or third party. Irrespective of the type of insurance plan you avail, IDV or Insured Declared Value comes into the picture.
So what exactly is Insured Declared Value (IDV)?
IDV is instrumental in offering the maximum sum assured under your bike insurance policy. It is the maximum amount that is provided in times of a total loss or damage or at the time of the theft of your vehicle. The premiums charged are directly proportional to the IDV of the vehicle. To simplify it further, it is the current market value of your vehicle.
Now that we know what is insured declared value let us understand how it is computed.
IDV, in case of a new vehicle, is calculated using the selling price as listed by the manufacturer (ex-showroom price). In contrast, the same is adjusted for depreciation in subsequent periods. The registration and insurance costs are excluded in this calculation. Some plans offer coverage for the accessories which are not originally included with the vehicle. These accessories can be insured at an additional premium too.
In case the policyholder files a claim for complete damage or loss, IDV is the maximum amount that will be paid towards your bike insurance. A few insurance companies may not give you the option to customise IDV in case of third party insurance for bike.
How is depreciation accounted for in calculating IDV?
Depreciation is the reduction in 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 purpose of IDV
|Not more than 6 months
|More than 6 months but not more than 1 year
|More than 1 year but not more than 2 years
|More than 2 years but not more than 3 years
|More than 3 years but not more than 4 years
|More than 4 years but not more than 5 years
While the above rates are provided for vehicles up to 5 years of age, the insured declared value for older vehicles than that is computed by a mutual agreement.
From the above, we can conclude that the IDV is inversely related to your vehicle age.
It is assumed that since the IDV is the determining factor in arriving at the premium for two-wheeler insurance renewal, declaring a lower value may do the trick. While this may reduce the premium to your bike insurance policy, having a lower IDV can be a problem later.
Say, for example, your vehicle gets stolen, and you file a claim for theft, the insurer will only offer the amount as per IDV. If you declared a lower value to save premium, the insurance company’s reimbursement would also be lower in that case. For this reason, you mustn’t overstate or understate your insured declared value.
The bottom line, IDV plays a vital role in calculating your bike insurance premiums. Make sure you declare the correct value for an optimal amount of insurance premium.