You may have wondered about IDV when comparing two-wheeler insurance policies. IDV stands for Insured Declared Value, the maximum potential payout the insurance company owes to the covered bike owner in case of a valid claim.
Consider reading further to understand how the IDV affects your premium and its related components.
What Does IDV Mean in Bike Insurance?
An IDV in bike insurance is the maximum amount quoted by an insurance provider to compensate for a policyholder’s loss. You can claim this sum if your bike gets damaged due to an accident or stolen during the insurance period.
Generally, the current market value of your bike determines the IDV offered by various two-wheeler insurance companies.
Why is IDV in Two Wheeler Insurance Important?
IDV has no connection with knowing the resale value of your two-wheeler. Instead, the IDV is used to determine the premium and the compensation amount that an insurance company is liable to pay you if your bike faces damages that are beyond repair or are stolen. The technical term for such a situation is Total or Total Loss.
How Do You Calculate the IDV of a Bike?
The IDV value can be easily figured out by considering the prevalent selling price of your bike in the market. Here’s a quick formula to calculate your two-wheeler’s IDV:
IDV = (Vehicle’s Listed Market Price – Depreciation Cost) + (Cost of the Bike Accessories – Depreciation Value of the Parts)
As you can see, the above formula even considers the prices of additional accessories while computing the IDV. Thus, if you have already invested in bike body covers, gears, tyre inflators, etc., their prices are also included in the IDV.
IDV Calculation Method for Bikes Without Any Accessories
The calculation of IDV may be complicated when accessories are taken into consideration. Otherwise, anyone can calculate the IDV of their vehicles themselves by using an online calculator. For that, the formula will be:
IDV = Bike’s Cost as Registered by its Manufacturer – Depreciation Value
Example
Let’s assume the market price of your bike was ₹2.5 lakhs when you bought the insurance policy. In that case, your insurer will pay up to the maximum IDV (Insured Declared Value) you select if your bike is totally damaged or becomes irreparable for any reason.
However, you can only claim for the IDV if your bike faces theft or gets severely damaged within the insurance policy tenure.
Major Factors Contributing to the IDV of Your Bike
These are the main criteria that define the IDV of an individual bike:
1. Age of the Bike
As evident from the details above, the IDV goes exactly by its definition and is calculated based on the market value of a vehicle. Thus, the age factor in your bike is vital while assessing the correct IDV for it. As a result, the IDV will be lesser for old-model bikes and correspondingly greater for relatively newer bikes.
2. Vehicle’s Registration Location
The registration information of your bike is used to assess the IDV to a great extent. The registration city or location is mentioned on your bike’s Registration Certificate (RC). This location heavily impacts the different IDV options you have to choose from.
For instance, the IDV of a bike that you purchased and registered in a Tier-I city can be lower than the coverage offered in a Tier-II city.
3. Make & Model of the Bike
The make and model of your bike are also influencing factors for the IDV as they surpass the manufacturer’s details. For instance, the IDV of TVS Apache will be smaller than that of Bullet 350 because of significant differences in make and model.
4. Depreciation of the Bike
While discussing depreciation, your bike starts losing its value after some time or when used over a long time. This depreciation percentage will keep rising next year and in the subsequent years. Hence, this is also likely to have a very huge impact on the IDV. An insurance company will analyse a two-wheeler vehicle’s depreciation pattern in subsequent years to determine the correct IDV value.
IDV Calculator – Depreciation Rates of Bikes
You have probably realised how crucial IDV value is as an insurance tool. So, let us focus towards learning how the Insurance Regulatory and Development Authority of India (IRDAI) has published a depreciation rate table to ensure justified compensations during insurance policy claims.
The following depreciation rates directly help in calculating the IDV of your bike:
| Bike’s Age | Rate of Depreciation for IDV Calculation |
|---|---|
| 6 months or lesser than 6 months | 5% |
| More than 6 months but not exceeding a year | 15% |
| Between 1-2 years | 20% |
| Between 2-3 years | 30% |
| Between 3-4 years | 40% |
| Between 4-5 years | 50% |
How Does IDV Affect Your Two-wheeler Insurance Premium?
The premium amount of the IDV chosen for your bike insurance plan will be directly proportional to one another. In other words, the greater the chosen IDV is, the higher the insurance premium.
If you plan to sell your bike, a higher IDV will fetch you a better price. Nevertheless, the reselling price also depends on other factors like insurance claims in the past, the bike’s usage, and other similar considerations. Therefore, when selecting a motor insurance policy, please read the details of the IDV provided and select the right IDV.
Manually figuring out the IDV is a hectic task. Additionally, chances are high that you will make calculation errors. So, take the time to understand the different aspects of IDV, and then use an online calculator to find the ideal coverage. This way, you can pick the most appropriate insurance plan and select a premium that aligns with your budget.
Also Read: How Investigators Catch Fake Health Insurance Claims
