When you buy two wheeler insurance you often look at the coverage which the plan offers and the premium that it charges. Comprehensive two wheeler insurance plans have a value called the Insured Declared Value (IDV). This IDV is considered to be the sum insured of the two wheeler insurance policy. A lot of people look at the value and do not understand its meaning, how it is calculated and its significance in the bike insurance policy. So, let’s understand the concept of IDV in details –
What is Insured Declared Value (IDV)?
IDV, as stated earlier, is the sum insured of the bike insurance policy. It represents the value of the bike after deducting the depreciation based on the age of the bike. IDV of the bike is calculated as follows –
IDV = listed price of the bike – depreciation based on the bike’s age
The listed price of the bike would be the manufacturer’s listed price and would not include the cost of registration of the bike and insurance. Moreover, if additional accessories are fitted in the bike, the IDV would be increased to account for the value of such accessories. In that case, IDV would be calculated using the following formula –
IDV = (listed price of the bike – depreciation based on the bike’s age) + (listed price of the additional accessories – depreciation of the accessories based on their age)
Depreciation of IDV
The rate of depreciation depends on the age of the bike. The older the age, the higher the depreciation and, therefore, lower the IDV. Therefore, as the bike ages, the IDV reduces year on year.
The rate of depreciation for calculating the IDV is as follows –
|Age of the car||Applicable rate of depreciation|
|Less than 6 months||5%|
|More than 6 months but less than 1 year||15%|
|More than 1 year but less than 2 years||20%|
|More than 2 years but less than 3 years||30%|
|More than 3 year but less than 4 years||40%|
|More than 4 years but less than 5 years||50%|
If the bike is more than 5 years old, the IDV is negotiated between the insurance company and the bike owner and a mutually agreed value is assigned.
Importance of IDV in two wheeler insurance
IDV is an important component of the two wheeler insurance policy. Here’s how –
· IDV determines the premium payable for the bike insurance plan. A higher IDV means a higher premium outgo and vice versa.
· If the bike is totally damaged such that the repair costs of the bike would exceed 75% or 80% of the IDV, it is deemed to be a constructive total loss. In case of a constructive total loss, the IDV of the insurance policy is paid. Similarly, if the bike is stolen and not recovered, the insurance company pays the IDV as the final settlement of claim against theft of the bike.
· IDV represents the sum insured of the policy. This means that IDV is the maximum liability of claim which the insurance company would pay. As such, it is always advised to opt for the most optimal level of IDV when you buy two wheeler insurance. If the IDV is low, the claim amount would also below and if the IDV is unreasonably high, it would result in higher premium outgoes.
Given these important points pertaining to IDV, having the most suitable IDV is important both when buying and at the time of two wheeler insurance renewal online. In fact, at the time of two wheeler insurance renewal online, you can compare different plans and choose the policy which offers the most optimal IDV level keeping your bike’s age in mind.