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Insurance Article

Understand the Depreciation Value of Your Two Wheeler

August 08 2016
Two Wheeler Insurance

A study on how the Insured Declared Value (IDV) of a two wheeler depreciates over time

Planning to buy or sell a used two wheeler, but unaware of the depreciation value of the two wheeler of your choice? Understand the finer aspects of depreciation value of your two wheeler.

What is Depreciation and IDV?

Depreciation is the decrease in value of an asset over time. Two wheelers undergo immense wear and tear during their lifetime, which reduces their market value with time. For insured two wheelers, policy providers offer a complete list of depreciation rates in accordance with Indian Motor Tariff for different stages during the two wheeler’s lifetime.

The maximum value payable by the insurer in case of an accident, theft or damage of a two wheeler is called the “Insured Declared Value” (IDV). Simply put together, it is the current market value of your two wheeler.

If your two wheeler met with an accident, then IDV is the compensation provided to you by the two wheeler insurance  company. This compensation gets reduced as the life of your two wheeler increases.

Calculation of IDV

The IDV is always calculated on the manufacturer’s listed selling price of a particular brand and model of the two wheeler. It is the amount proposed for insurance at the commencement or renewal of the insurance and is adjusted for market depreciation as per the schedule listed below:

Vehicle’s Lifetime Percentage Of Depreciation
Less than six months 5%
Exceeding six months but less than a year 15%
Exceeding one year but less than two years 20%
Exceeding two years but less than three years 30%
Exceeding three years but less than four years 40%
Exceeding four years but less than five years 50%

If your two wheeler is 5 years old or beyond, you would still get the IDV amount depending on the condition of your two wheeler’s body parts and its serviceability. Even if your two wheeler is an obsolete model, you will still be able to get its IDV value through a mutual agreement with your insurance company.

Understanding IDV Better

Always remember that the compensation is provided only in case of total loss, accidental damage or theft of your two wheeler and within the motor insurance policy period. Another interesting fact is that IDV is always calculated on the current selling price of the vehicle and not the one at the time of purchase.

For instance, a bike costs ₹ 80,000 in 2015 and the same model costs ₹ 90,000 in 2016, then your IDV will be calculated on ₹ 90,000.

Often, buyers compromise IDV at the time of purchase. A lower IDV at the time of purchase will reduce the cost of premium but will result in a much higher loss while making a claim. It is therefore advisable to not skimp on your premium and declare the correct IDV of your two wheeler.

What Happens If I Sell My Two Wheeler

If you sell your two wheeler to another person then your insurance also gets transferred to that person and the IDV will continue as previous. However, the same insurance cannot be transferred to a different two wheeler and a fresh insurance needs to be purchased in such case.

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