Insured Declared Value is a key part of two-wheeler insurance. It shows the current market value of your bike or scooter and helps decide how much money you will receive if your vehicle is stolen or damaged beyond repair.
A proper IDV gives you the right insurance cover and helps you make clear, smart decisions about your two-wheeler. In this blog, we explain what IDV means, why it matters for used bikes and scooters and how it is calculated.
What is Insured Declared Value?
IDV or Insurance Declared Value plays a key role in chalking out the maximum sum assured in case of theft or damage of your two-wheeler. It is the maximum amount of money you are entitled to get if your vehicle is lost, broken down or is damaged beyond repair, within the policy cover period. The premium you pay for your vehicle insurance is directly proportional to the IDV.
Importance of IDV for used two-wheelers
IDV is especially important for the used two-wheelers for several reasons:
1. Accurate insurance cover
It's important to have the right IDV so your insurance works well for you. If your IDV is too high, you’ll have to pay more money for your insurance each year. That’s not ideal because you may be paying for more than what your bike is worth. If your IDV is too low, your insurance will be cheaper, but you won’t get enough money if your bike is stolen or badly damaged. You might not have enough to replace it. So, having the correct IDV helps you get fair protection without paying too much.
2. When buying or selling a used two-wheeler
If you are planning to buy a used bike or scooter, the IDV tells you how much it is worth today. It helps you understand if the seller is asking for a fair price. If you are the seller, you can use the IDV to set a reasonable price for your vehicle.
3. Getting a loan or finance
If you want to take out a loan to buy a two-wheeler, banks or finance companies will look at the IDV to decide how much money they can lend you. A higher IDV means your bike is worth more, so you might get a bigger loan. A lower IDV might mean you get less money from the lender. So, a proper IDV can help you get better loan offers.
4. Knowing the resale value
Even if you’re not selling your two-wheeler right now, knowing its IDV helps you understand how much it is worth in the market today. This is useful if you want to compare prices with other bikes or are planning to sell it shortly. IDV acts like a price guide, helping you stay informed about your bike’s current value.
In short, IDV is like the financial heartbeat of your two-wheeler. It tells you how much your ride is worth right now.
How do we calculate it?
A very important point to remember here is that IDV is not calculated on the price that 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.
Difference Between IDV of New vs Used Two-Wheelers
The main difference between the IDV of new and used two-wheelers is the rate of depreciation.
New two-wheelers: IDV is close to the purchase price as very little depreciation has occurred.
Used two-wheelers: IDV is lower due to higher depreciation. The older the vehicle, the lower the IDV.
This is why used bikes cost less to insure—they are worth less, so the risk to the insurer is smaller.
Also, for vehicles older than 5 years, the IDV isn’t calculated strictly by depreciation percentages. It’s agreed upon by the owner and the insurance company, often based on the condition of the vehicle, make and model and current market trends.
How does IDV affect the resale value of a used two-wheeler?
IDV plays a role in shaping the resale value of a used bike or scooter, but it’s not the only factor. Here’s how it influences resale:
- Guides buyers and sellers: A well-maintained bike with a higher IDV is seen as more valuable. Buyers often ask for the IDV to make sure they’re not overpaying.
- Negotiation tool: While it's not entirely accurate to say the IDV directly dictates the selling price, both buyers and sellers use the IDV as a reference during price negotiations.
However, the final resale price can also depend on other factors like brand popularity, modifications, mileage and service history.
Depreciation in IDV rates
In the terms of Insurance, depreciation is the calculated reduction in the value of an asset that changes with time. This is of utmost importance in the case of used vehicles. Ideally, depreciation is adjusted on the vehicle’s selling price as listed by the manufacturer. If a vehicle is not more than six months old, the deprecation value is 5%.
This goes up periodically and reaches a value of 50% of the market price in 4-5 years. In case the two wheeler is more than five years old, the IDV is calculated by an agreement between the insurance company and the policyholder.
Insuring your two wheeler the right amount of IDV is the first step towards ensuring an infallible financial backup. So, get your ride insured and ride without the fear of any financial roadblocks.
Conclusion
Understanding IDV is essential if you own or are planning to buy a used two-wheeler. It helps you know the actual value of your vehicle, ensures you get fair insurance coverage and plays a role in how much you can sell it for later.
IDV might sound technical at first, but it’s just about knowing what your bike is worth today. By keeping track of your two-wheeler’s IDV, you’ll be better prepared to make smart decisions, whether it’s about insurance, resale or simply taking care of your ride.
If you're looking to protect your bike in the best possible way, choosing the right two wheeler insurance policy is just as important as knowing the correct IDV. A comprehensive two wheeler insurance plan not only covers damages to your own vehicle but also includes third-party liabilities, theft and natural disasters.
FAQs
1. Can I choose my own IDV?
Yes, but only within a certain range. Insurance companies usually allow you to select an IDV in a range above or below the calculated value. Choosing too high or too low can affect your premium and claim amount.
2. Does IDV change every year?
Yes. IDV decreases every year as your vehicle gets older. That’s why premiums also tend to go down for older bikes.
3. Is higher IDV always better?
Not necessarily. A higher IDV means a higher premium. It’s better to choose an IDV that reflects the true market value of your two-wheeler.
4. How does IDV affect my insurance premium?
Higher IDV = Higher premium. Lower IDV = Lower premium. But if IDV is too low, the claim amount may be inadequate.
5. What happens if I sell my bike? Does IDV matter to the new owner?
Yes, it does. The new owner will use the IDV to get insurance and also assess how much the vehicle is worth. It helps with transparency during resale.
6. Is IDV valid for scooters as well?
Absolutely. IDV applies to all two-wheelers: motorcycles, scooters, mopeds, etc.
7. Can I increase the IDV of my old bike?
You can request a higher IDV, but insurers may not agree if the vehicle is too old or not in good condition. It must be justified.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the Insurance industry and products. 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.