Understanding the Insured Declared Value (IDV) is important when protecting your bike with two-wheeler insurance. It determines the maximum compensation you can receive from your insurer in case of theft or damage. So, what does IDV mean in bike insurance? It is essentially your two-wheeler’s current market value after depreciation.
Read on to understand why IDV matters.
Impact of IDV on premium
The bike insurance IDV influences the premium you pay in the following ways:
- A higher IDV means a high premium because the insurer might have to pay more if you register a claim.
- A lower IDV leads to a low premium, but you could get a smaller claim settlement if something happens to your bike.
- The Own Damage (OD) premium typically ranges between 2% and 3% of the IDV, further impacting the overall insurance cost.
Choosing the right IDV in bike insurance will keep your premium fair while ensuring adequate protection.
Select the right IDV
The IDV is calculated based on the manufacturer's listed selling price. It is determined at the beginning of a policy term and then adjusted with depreciation.
Use the following formula when calculating the right IDV of your bike:
IDV = (Manufacturer's registered cost of the bike) – Depreciation value
Depreciation is calculated based on the vehicle's age:
- Less than 6 months: 5%
- 6 months to 1 year: 15%
- 1 to 2 years: 20%
- 2 to 3 years: 30%
- 3 to 4 years: 40%
- 4 to 5 years: 50%
For bikes older than 5 years, the IDV is calculated based on the bike's condition.
Example:
The manufacturer's registered cost of your bike is ₹1,00,000, and its age is 2 years.
Then, the depreciation value based on the 20% rate will be ₹1,00,000 × 20% = ₹20,000
IDV will be = ₹1,00,000 - ₹20,000 = ₹80,000
Note: For comprehensive coverage, the IDV for bikes with non-factory-fitted accessories (e.g., alloy wheels, custom seat covers, and GPS systems) requires separate calculations at an extra cost.
Conclusion
The IDV is the most important aspect of a two-wheeler insurance policy. Understanding it will help you make an informed choice. While a lower IDV might seem appealing due to the low premium, it's crucial to consider the potential financial implications in case of theft or damage beyond repairs. Selecting a bike insurance IDV closest to your motorcycle’s market value will ensure fair coverage and protect you against significant financial loss.
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.