Insured Declared Value or IDV is the maximum reimbursement amount you can claim in case of accident or theft of your two-wheeler. Therefore, it is important to select the right insurance policy for your bike to sufficiently cover the fund requirement during mishaps. Additionally, it helps your vehicle insurer to decide the market value of your vehicle so that they can approve your policy claim during your hour of need.
Calculation of IDV
You can use the following formula to calculate the IDV of your two-wheeler:
IDV = Purchase price – Depreciation rate X purchase price
The depreciation rates of IDV for two-wheelers usually keep on increasing with their age as follows:
- Less than or equal to 6 months – 5%
- 6 months to 1 year – 15%
- 1 year to 2 years – 20%
- 2 years to 3 years – 30%
- 3 years to 4 years – 40%
- 4 years to 5 years – 50%
After five years, your vehicle insurer will decide on the IDV of your bike based on the state of its component and serviceable condition. However, there are certain factors that you must be aware of which can significantly affect the IDV of your vehicle.
Factors Affecting IDV
Below are certain factors that significantly affect your vehicle’s IDV:
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Age of your bike:
With an increase in the age of your bike, the depreciation rate increases, and so the IDV of your two-wheeler decreases.
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Type of fuel your bike uses:
IDV varies considerably depending on whether your bike runs on battery or petrol.
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Your bike’s make and model:
IDV of your two-wheeler increases significantly with the increase in advanced features of your bike.
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City of your bike’s registration:
If your bike’s registration is done in a metropolitan city, its IDV in bike insurance will be more than one in a rural area.
These are crucial factors that you must take into consideration while calculating IDV. Determining the correct IDV is important to prevent you from staying underinsured while purchasing a bike insurance policy.
Importance of IDV
The importance of IDV of a bike insurance policy can be summarised in the following points:
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Determination of insurance premiums:
You can determine the premiums based on the IDV of your vehicle. That is, if the IDV is lower, the premium too will be less and vice versa.
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Estimating the correct value of bike:
Your two-wheeler insurer can rightly estimate the current market value of your vehicle. Based on this, you must choose an insurance policy to sufficiently cover the damage repair costs.
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Deciding the claim amount:
Based on the IDV, your insurance claim amount will be sanctioned by your vehicle insurer. Hence you must rightly declare the value to get sufficient financial coverage.
You must always refrain from declaring a lower IDV as you might end up receiving lowerfinancial compensation in case of accidents or thefts. Additionally, you must keep in mind that IDV is only applicable to own damage policies and not applicable for a third-party insurance policy.