Bike insurance protects your wallet from sudden, unpredictable expenses that you may have to incur due to mishaps of or with your two-wheeler. During bike insurance renewal, you will come across the term ‘IDV’, which stands for ‘Insured Declared Value’.
In essence, IDV is the present depreciated market value of your bike. It represents the maximum assured value the insurance company will compensate you if your motorcycle is stolen or meets with an accident resulting in partial or total loss of its components’ usability.
IDV Calculation for Bike Insurance
IDV in bike insurance is calculated on the bike manufacturer’s notified selling price. A depreciation factor is considered based on the bike’s age for deduction of the corresponding amount from the selling price. It is assumed that the bike’s components are subjected to age and usage related wear and tear.
Bike registration costs and road tax are not considered when calculating the IDV. Accessories installed after the bike’s purchase must be evaluated separately by the insurer’s surveyor for IDV adjustment.
The rate of depreciation vis-à-vis the bike’s age is available for ready reference in the table below.
|Two-wheeler’s Age Range||Depreciation Rate|
|6 months or less||5%|
|6 months – <1 year||15%|
|>1 year – <2 years||20%|
|>2 years – <3 years||30%|
|>3 years – <4 years||40%|
|>4 years – <5 years||50%|
|>5 years||Decided with mutual consent between owner and insurer after factoring in bike’s serviceable condition, components’ material, and state.|
Other factors considered for IDV calculation are:
- Bike’s model and make: An expensive motorcycle will have a higher IDV
- Type of fuel used for running the bike
- Place of bike’s registration: IDV will be different for bikes registered in the metropolitan and rural areas
- Mileage covered
- Cubic capacity of the bike
Advantages of Proper IDV Calculation for Bike Insurance
When renewing your bike insurance, a properly calculated IDV spells several benefits. These have been discussed below.
Premium Value for Bike Insurance Renewal Gets Optimized
The premium paid by you for renewing bike insurance is directly proportional to the IDV. IDV is used for determining the present market value of bikes. Hence, you are not required to pay a premium corresponding to the bike's original purchase price. With each passing year, you will benefit from a reducing insurance renewal premium value.
The ‘Own Damage (OD)’ premium is usually 2%-3% of the IDV and is determined by cubic capacity, the bike's age and other relevant factors. Proper IDV calculation saves you from paying more for OD coverage.
After a Mishap, the Insurer Provides Adequate Compensation
If you understate the IDV during renewal for lowering the premium
- You will get significantly reduced compensation that will be inadequate for covering the incurred losses after a mishap
- You will have to pay an additional sum from your pocket to get repairs done.
The correct IDV is important for
- Getting the highest reimbursement from the insurer based on the bike’s present value after theft or damage.
- Saving on the premium paid because even if you deliberately declare a higher IDV during renewal, the insurer will pay only the fair value after factoring in depreciation.
- Not being legally accused by the insurer of duping the company wilfully.
You can now better appreciate the importance of correct IDV calculation during bike insurance renewal.
The Insurer Can’t Deny the Reimbursement Claim
If you live in an area where the possibility of your bike sustaining damage is high, the insurer will look for excuses to deny you your rightful bike insurance claim. One such avenue is the IDV.
If the insurer figures out that the IDV based on which you had paid the premium during bike insurance renewal is not corresponding with the actual IDV based on a pre-set formula, it can decline your compensation claim.
Hence, it is important to ensure that the IDV value calculation is accurate.
The importance of proper IDV calculation during bike insurance purchase or renewal is undeniable. You can exercise your right to get the best IDV by negotiating the value with the insurer. IDV has a major role in fetching you the optimum compensation if your bike is stolen or completely damaged. Always make an informed decision to set the right IDV so you won’t have to regret it later.
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