Many a time, insurance terminologies are difficult to grasp. However, some jargon, if not understood well, can cause trouble during claim settlement. One such term is IDV or Insured Declared Value. In simple terms, IDV is the maximum claim you are entitled to from your insurer in the event of total loss or theft. IDV also plays an important part in determining your bike insurance premium. Let's go over it in detail.
Factors affecting the insured declared value (IDV)
IDV depends upon the following variables:
- Bike's age
- Registration date of the bike
- Place of registration
- Make & model and variant
- Fuel type
- Insurance policy tenure
How is IDV of bike calculated?
A bike is a depreciable asset that loses value over time. It is not only a vital factor in determining insurance premiums, but it also influences the reimbursement value during claim settlement. According to the Indian Motor Tariff, the depreciation rates are as follows:
|
Age of the bike
|
Depreciation Percentage
|
|
Less than 6 months
|
5%
|
|
Between 6-12 months
|
15%
|
|
Between 1-2 years
|
20%
|
|
Between 2-3 years
|
30%
|
|
Between 3-4 years
|
40%
|
|
Between 4-5 years
|
50%
|
The rate of depreciation increases with the bike's age. As a result, older bikes are less worthy than two-wheelers in their early years. If your bike is more than five years old, depreciation will be calculated making spare parts and serviceable condition a base.
In case you own an obsolete two-wheeler, the insurer will arrive at an IDV after reaching a mutual agreement with you.
Impact of IDV on bike insurance premium
IDV is one of the most important factors in determining the premium for your comprehensive two-wheeler insurance policy. The cost of insuring your motorcycle is proportional to the IDV. Furthermore, the amount you declare as IDV is what you will receive as compensation if your bike is completely damaged or stolen.
- Higher IDV = Higher Premium: In most cases, a higher IDV is recommended because it helps you get a decent value in the event of theft or total loss. If you own an obsolete or old bike, declaring a higher value will result in a claim rejection. The ideal IDV should be more in line with the bike's current market value.
- Lower IDV = Lower Premium: A lower IDV reduces the premium but can result in inadequate compensation if your bike is irreparably damaged or stolen.
- Balanced IDV Choice: It’s essential to choose an optimal IDV that provides adequate coverage without unnecessarily inflating the premium.
- Third-party bike insurance vs. Comprehensive Insurance: IDV is applicable only for comprehensive policies, as third party bike insurance covers damages caused to others and does not compensate for the insured bike’s loss.
Conclusion
The IDV in bike insurance is the maximum amount your insurer will pay in the event of theft or irreparable damage to your two-wheeler. This value is determined by factors such as the make and model of the bike, the registration date, the registration location, and the fuel type. Understanding how IDV is calculated and the way it affects your bike insurance cost helps in selecting the right coverage. Whether opting for third party bike insurance or comprehensive coverage, ensuring a well-balanced IDV choice is key to securing the best protection for your bike.
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.