Every year, millions of bikes are bought and sold in India. Easy to manoeuvre through traffic, easy to park, easy on the pocket—no wonder bikes are one of the most preferred motor vehicles among the masses. From commuting to work to taking care of day-to-day activities such as going for daily buys, dropping kids to school, and going for long rides, bikes offer unmatched convenience on roads. Consequently, it is only obvious that bike insurances are equally significant.
However, there is a general notion that choosing and buying the right insurance policy is complicated, and it is true up to some extent. This is mostly because of the technical terms and jargon that are used to describe and explain insurance policies. One such technical term surrounding two-wheeler insurance is IDV or the Insured Declared Value. The premium that you pay on your bike insurance is based on its IDV. Thus, it is extremely important to know what IDV is and why it is important.
What is IDV?
IDV stands for Insured Declared Value. IDV in bike insurance shows the current market value of your bike. Before you sign and confirm the bike insurance policy, the IDV is decided. Both you and yourtwo-wheeler insurer agree upon this amount as the current value of the bike.
The IDV amount is t he most that you would be paid in case of a total loss or theft. It is the total value that the insurer will pay to the insured as compensation in case of complete damage or loss or theft of the bike. Since Insured Declared Value is the maximum amount that the bike insurance provider might have to pay, the premium on your two-wheeler is dependent on the same.
It should be noted that IDV is applicable only in case of own damage cover and comprehensive bike insurance plans.
Why IDV is so important in two-wheeler insurance?
IDV in bike insurance is one of the most important aspects of your two-wheeler insurance policy.
- Helps determine the right value of the bike – The IDV determines the right current value of your bike by taking into consideration factors such as the make, model, area or city where it is used, traffic density of the city,age, the cubic capacity, and the depreciation of the two-wheeler. Based on the current market value, the coverage will be determined.
- The premium of the bike insurance depends on it – The premium that you pay on your bike insurance is based on its Insured Declared Value i.e., current market value. The higher the IDV, the higher will be the premium and vice versa. While a lower IDV can cost you a lower premium, you might end up bearing high losses in case of total loss, damage, or theft. Note that IDV is one of the many factors that determine your two-wheeler insurance premium amount.
- Claim amount depends on it –As mentioned earlier, Insured Declared Value is the maximum amount that is payable to you by your bike insurer. So, it is extremely important to choose the correct IDV. If you set the IDV way too low or high, you run the risk of not getting enough coverage.
What are the factors affecting IDV?
As IDV shows the current market value of your bike, the same is dependent on multiple factors such as:
- The make and model of the bike – The value of a bike highly depends on its model and features. The higher the price of the bike, the higher will be the IDV.
- The variant of the bike –There are different variants of the same bike of the same brand and their costs differ as well. Consequently, the IDV will also be different for the variants of the same model.
- Age of the bike –Depending on the purchase date of the bike, the depreciation rate is determined, based on which the IDV is decided.
- City of registration – The place where you have registered your bike also influences the IDV; the cost of coverage differs in densely populated areas compared to sparsely populated ones.
- Ex-showroom price –The ex-showroom price is the cost of manufacturing the bike at its facility along with the GST. The IDV of a new bike is taken as 95% of its ex-showroom price. The discounting percentage increases as the bike ages.
- Type of fuel –Whether the bike runs on petrol or diesel or is an electric bike also determines its value, and thus affects the IDV.
- Type of bike insurance –The concept of Insured Declared Value comes into play only when own bike is covered. Thus, it is applicable for own damage cover bike insurance or a comprehensive plan.
How IDV is calculated?
The Insured Declared Value is calculated based on the selling price of the bike manufacturer, its age, and depreciation. The depreciation is calculated on the amount that the manufacturer values the bike at and not what you think the value of the bike could be.
For example, say you buy a bike for Rs 90,000. The IDV of your brand-new bike will be Rs 85,500, which is 95% of the manufacturer’s price. After two years, owing to depreciation the value of the bike becomes Rs 72,000. This will be your IDV. On a personal level, you may find a buyer who is ready to buy your bike at Rs 75,000 but that is not the IDV of your bike after two years.
Given below is a table to help you know the depreciation rate with respect to the age of your two-wheeler:
| Age of the Bike | Depreciation Rate |
| 6 months and below | 5% |
| 6 months to 1 year | 15% |
| 1-2 years | 20% |
| 2-3 years | 30% |
| 3-4 years | 40% |
| 4-5 years | 50% |
| 5 years + | Mutually decided by the insurer and the policyholder |
Thus, IDV is extremely important in determining the premium and the maximum coverage that you will get in the unfortunate event of total damage or if your bike is stolen.
What did we learn?
