When you are buying two-wheeler insurance, it is very important that you first learn about the various aspects of it. One of the most important aspects of a bike insurance policy is the Insured Declared Value (IDV). In case of a total loss of your two-wheeler because of an accident or theft, your insurance company pays you a pre-decided amount of money. This sum assured is decided by the insurer and it is called the IDV. To put it simply, the IDV is the assumed value of your bike in the time of you buying the insurance policy.
How is IDV calculated?
At the time of the insurance policy’s commencement, the insurer checks the value of your two-wheeler declared by the bike’s manufacturer. This value is set as the IDV of the insurance policy. The depreciation adjustment happens with time as the value of your bike decreases with age.
The depreciation rate follows this calculation:
- Six months to one year: 15%
- One to two years: 20%
- Two to three years: 30%
- Three to four years: 40%
- Four to five years: 50%
If your bike is more than five years old then the IDV is decided based on the condition of the body parts and how serviceability of the two-wheeler. Bikes that are older than five years and the bike models that have been discontinued do not have a fixed IDV. It has to be mutually decided by the insurer and the insured. Different components of your bike may have varied IDVs. In that case, an average of the values determines the overall IDV of the two-wheeler. In case of an older bike, the insurance companies may hire an inspector and you have to pay for their fee.
If you want insurance for bike accessories that are not factory fitted then their IDV will be calculated separately too.
How important is IDV
When buying online insurance for two-wheeler, you need to make sure that the IDV is correctly calculated or you will not receive fair compensation in case of theft or loss of two- wheeler due to an accident. The ideal IDV is the value of your two-wheeler according to the bike manufacturer. Some insurance companies may offer you a 5 to 10% reduced value for the IDV, which leads to a discounted premium. When you are looking for bike insurance companies, settle for the one that offers the best IDV. This is very important, as you surely want to get a cover for the bike’s actual value rather than settling for a reduced one.
Consequences of declaring a wrong IDV
Some customers tend to declare a higher IDV than the actual price of the bike, assuming that it will lead to a higher sum assured if a claim is made. A higher IDV will result in a higher premium and you may still be paid a low cover depending on the depreciation adjustments. Similarly, if you declare a low IDV, the sum assured will be even lower if you ever make a claim.
When you are checking the bike insurance quote, remember that it depends primarily on the IDV. So, it is important that you learn how it is calculated before going ahead with buying the insurance.