Depreciation's Impact on the IDV of the Two-Wheeler Insurance Plan

Updated on 6 Jan 2026

In India, owning a bike is about freedom, speed and the joy of navigating through city traffic with ease. But did you know your bike starts losing value the moment it leaves the showroom? Factors like ageing, regular wear and tear and changing market trends gradually reduce its worth over time. This drop in value directly affects your bike insurance coverage through a key factor known as depreciation.

In this blog, let’s understand how depreciation affects the IDV of insurance, i.e., the Insured Declared Value and how this change can impact the level of financial protection you receive.

What is depreciation in a two-wheeler?

Depreciation is the decrease in the value of an asset over time. In the context of two-wheeler insurance, the depreciation value of the bike helps the insurer determine your bike’s current market worth.

Like all machines, two-wheelers undergo wear and tear during their lifetime, which reduces their market value over time. For insured two-wheelers, policy providers offer a complete list of depreciation rates (as per the Indian Motor Tariff) for different stages during the two-wheeler’s lifetime.

In simple terms, depreciation plays a major role in calculating the Insured Declared Value (IDV) of your vehicle. Since IDV directly influences your insurance premium, depreciation ultimately helps determine how much you will pay for your policy.

What is IDV?

The Insured Declared Value (IDV) refers to the amount your insurance company considers your bike to be worth when you purchase or renew your policy. Simply put, it reflects your bike’s current market value after factoring in depreciation.

In case your two-wheeler is stolen or suffers total damage in an accident, the IDV is the maximum amount your insurer will pay. It also acts as the sum insured under the Own Damage (OD) section of your bike insurance policy.

How is IDV calculated?

A very important point to remember here is that the depreciation value of a bike in India is not calculated on the price you have paid for purchasing the vehicle. Instead, it is calculated considering the market value of the two-wheeler on the commencement of the policy. This value varies largely with time.

Ideally, you should get your vehicle insured within six months of the purchase to get the maximum IDV. The older your vehicle, the lesser will be the IDV and the premium.

Here’s the formula to calculate the insured declared value (IDV):

Insured declared value (IDV) = {Bike's current market value - depreciation costs} + {Accessories cost - depreciation value of accessories}

To fully comprehend the insured declared value (IDV), you must first understand the influence of depreciation in percentage on the age of a two-wheeler.

What factors affect the IDV of a bike?

Several factors influence the IDV of a two-wheeler, such as:

• Age of the vehicle: Older bikes have higher depreciation, leading to a lower IDV.
• Make and model: Premium models may retain value longer than standard models, hence a higher IDV.
• City of registration: Market values can vary based on location.
• Accessories: Additional fittings can increase the IDV if they are insured.

Is IDV directly related to the premium rate of bike insurance plans?

The IDV and the premium rate are closely linked. A higher IDV means that the insurer might need to pay more in case of a claim, which can increase the premium amount. On the other hand, a lower IDV may reduce your bike insurance premium. However, declaring an IDV that is too low to save on premium costs can leave you underinsured when you file a claim. It’s always better to maintain the right balance between adequate coverage and affordable premiums.

How does depreciation affect the IDV of two-wheeler insurance?

As your bike gets older, its value naturally decreases due to depreciation, which in turn lowers its IDV. For example, if your bike’s ex-showroom price was ₹1 lakh, after one year with 15% depreciation, the IDV might reduce to around ₹85,000. After two years, with 20% depreciation, it might drop even further.

When the IDV decreases, the following may happen:

• The maximum payout in case of a total loss or theft becomes lower.
  
• The premium might reduce, but your overall coverage may also shrink.
  
• If you declare an IDV that is much higher than the actual market value, you may end up paying a higher premium, and your claim will still be settled based on the IDV or the market value, whichever is lower.

Depreciation rates for your bike

Below is the standard depreciation on the bike schedule generally followed in India for the two-wheelers under most insurance plans:

Tips to keep depreciation and IDV in check

Here are some helpful tips that can help you manage the bike’s IDV and depreciation effectively:

• When renewing or purchasing the plan, make sure the IDV provided by the insurance firm matches the two-wheeler’s current market value.
• Avoid declaring an IDV that is too low just to lower the premium, as it might reduce the claim payouts later.
• Keep the two-wheeler well-maintained, as its condition can influence how the insurance firms assess the value.
• Use online IDV calculators offered by the insurance companies to get an estimate before you finalise the policy.

Common mistakes people make with IDV

Many policyholders make avoidable mistakes when dealing with IDV. Some of the most common ones include:

• Accepting the IDV suggested by the insurer without checking the bike’s actual market value.
  
• Setting the IDV too low to save on premiums can result in reduced compensation in case of damage or theft.
  
• Forgetting to declare accessories or modifications, which might not be covered unless mentioned in the policy.
  
• Believing that a higher IDV will automatically guarantee a higher claim amount. While a high IDV does increase the premium, claim settlements still depend on the bike’s real market value at the time of the incident.
  
• Ignoring the bike’s age and depreciation rate, and expecting compensation equal to the cost of a new two-wheeler.

Conclusion

Depreciation plays a key part in determining your two-wheeler’s IDV, and every bike owner should understand how it works. As the bike ages, its value begins to drop, which affects the level of coverage you can get under the policy. When you keep track of the depreciation and pick a realistic IDV, you can ensure fair premiums and proper protection when you need it the most.

If you want personalised advice or guidance on picking a comprehensive bike insurance policy, fill out the form available on this page to receive expert guidance.

FAQs

• Is it possible to ask the insurance firm to increase the bike’s IDV?

Yes, you may request an increase, but it will lead to much higher premiums. It’s best to keep the IDV close to the two-wheeler’s actual market value.

• Does the IDV affect the third-party only bike insurance?

No. Third-party liability cover is compulsory and does not rely on the IDV. The IDV mainly applies to comprehensive and own damage insurance.

• After 5 years of use, how is the depreciation applied to IDV?

For bikes older than five years, the depreciation rate is not fixed. The IDV is decided mutually between the policyholder and the insurer, often after a physical inspection.

4. Does providing a lower mileage or better condition change the depreciation applied?

Yes. Maintaining the bike in great condition and keeping the mileage low might help you negotiate a better IDV during renewal.

Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.