Michael Curry
Bike insurance is often perceived as complicated by many. One of the reasons for such notion is the jargons used in describing an insurance policy. These terms might be confusing for the layman thereby making it not-so-pleasant experience overall. One such term is the IDV that you will definitely come across when buying a bike insurance policy and is crucial to understand it in detail.
What is IDV?
IDV or Insured Declared Value is the approximate market value of your bike. It is that amount which the insurance company will pay you in the event your bike is damaged beyond repair or faces total loss. Apart from it, even if your bike is stolen, such IDV is paid by the insurer. Thus, it is one of the crucial amounts that you need to keep an eye on when purchasing a bike insurance online or offline. This amount of IDV changes each year due to the impact of depreciation on your vehicle.
How is IDV calculated?
All vehicles are subject to wear and tear due to time. The effect of time impacting the condition of your vehicle is termed as depreciation. This depreciation begins the moment you take delivery of your bike. When calculating IDV, you need to remember that registration and insurance cost does not form part of it. However, if the insurance policy covers the accessories of your bike, the depreciation of such spares is also accounted for.
Mathematically expressed,
IDV = (Selling price by the manufacturer – Depreciation) + (Cost of accessories – Depreciation on accessories)
The Motor Tariff Act has prescribed a standard rate of depreciation which is as follows –
| Age of the vehicle | Depreciation for the purpose of IDV |
| Not more than 6 months | 5% |
| More 6 months but not more than 1 year | 15% |
| More than 1 year but not more than 2 years | 20% |
| More than 2 years but not more than 3 years | 30% |
| More than 3 years but not more than 4 years | 40% |
| More than 4 years but not more than 5 years | 50% |
| More than 5 years | Mutually decided between the insurer and policyholder |
What are the pointers you need to remember when setting the IDV?
- The first and foremost point is to not understate the IDV. Although it helps to lower the premium, it increases your financial risk in event of loss.
- In continuation to above, also do not overstate the IDV. Doing so will impact your premium. Compensation is provided by your insurer based on the assessment of the loss and not always an amount equivalent to the IDV.
- Lastly, avoid inaccurate setting of the value since it could lead to claim rejection.
The IDV works in direct proportion to your premium and thus lowering your IDV will also lower your premium. Not only do you save on money, it can also be utilised for other purpose. However, when doing so, remember the insurance company will pay a lower compensation in the event of total loss. For any damages where the expenses are steep, you might be required to compensate from your own pocket. It will burn a hole in your wallet to do despite having bought a bike insurance policy.
With the above pointers in mind, remember to set an IDV that will be suitable based on your estimate of the loss that might occur. You can also review the IDV at the time of bike insurance renewal to amend it if need be. A two wheeler insurance premium calculator can help decide what value to set based on its impact on the premium. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.
