Ultimate guide to understand IDV in bike insurance

While buying a bike the first thing that pops into our mind is its make, model, mileage, and other features. While these aspects are equally important there are some concepts and terms related to bikes and their purchases that one should be well aware of. One such crucial term is the Insured Declared Value (IDV). Insured Declared Value is a term related to two-wheeler insurance and its coverage. It is the IDV in the bike insurance policy that determines the resale value of the bike, or the compensation that you will if there is a total loss and you are seeking replacement coverage from your bike insurance provider.

Read on to understand what the Insured Declared Value of a bike is and why it is so important.

What is IDV in bike insurance?

If your bike incurs heavy damage and it leads to a total loss, or simply requires replacement due to theft or burglary, the sum that your bike insurance provider will pay against your claim, is the Insured Declared Value. The insured declared value is the current market value of your bike. That is, in case of a total loss of the bike, you will be reimbursed for the current market value of the bike.

The premium that you pay for your bike insurance is also based on its IDV. The higher the IDV of the bike, the higher will be your bike insurance premium amount. While buying two-wheeler insurance, you must factor in the IDV in bike insurance. This is because if the IDV of the bike is calculated to be too high, you may have to pay unnecessarily high premiums. On the other hand, if a lower IDV is quoted, while you may save some bucks on the premium payments, you will be underinsured and not get adequate cover in case of total loss or replacement of your bike.

How IDV is calculated?

The concept of IDV in bike insurance is valid for comprehensive or standalone own-damage bike insurance plans only. This is because, in the case of third-party bike insurance, there is no such scope for replacement cover or damage cover for own bike loss or damage. And the premium for third-party bike insurance plans is set by the Insurance Regulatory and Development Authority of India.

The calculation of the IDV of a bike is done as follows –

IDV = (Ex-showroom price – Depreciation) + (Cost of any accessories that have been added – Depreciation)

Note that, if you have not added any accessories to your bike, then you don’t have to consider that and the formular to calculate the IDV of the bike becomes even simpler. It should be further noted that the IDV of a bike does not include the registration costs, road tax, insurance cost, etc.

The depreciation rate is applied as per the norms laid down by the Indian Motor Tariff, which is given below –

Age of the bike Applicable depreciation to calculate IDV
Less than 6 months 5%
6 months – 1 year 15%
1 year – 2 years 20%
2 – 3 years 30%
3 – 4 years 40%
4 – 5 years 50%
More than 5 years Mutual agreement between the bike insurance company and the policyholder

What are the factors that affect IDV in bike insurance?

Some of the major factors that affect the IDV in bike insurance are –

  • Age of the bike – The depreciation of your bike depends on its age and hence is an important factor in determining the IDV in bike insurance. The higher the age of the bike would be, the higher the depreciation and thus a lower IDV.
  • Make and model of the bike – Whether your bike is a regular two-wheeler or a high-end, depends on the make and the model of the bike. The maintenance cost varies across different make and model of the bike.
  • Variant of the bike – It is quite common for brands to launch different variants of the same model and the cost of each variant differs from one another. Subsequently, the IDV of the variants will also differ.
  • Applicable depreciation rate – The IDV of a bike is based on its ex-showroom price, cost of any added accessories (if there is any) and the depreciation rate. The higher the depreciation rate, the lower will be the IDV in bike insurance.
  • City where the bike is registered – The place or the city where you have your bike registered also influences the insured declared value of the bike. If you use your bike in a metropolitan then the risks of accidents will be more than what it will be in a small town like Ajmer.
  • Type of fuel – The IDV of a bike also depends on the type of fuel used to power the bike.
  • Market value of the bike – As mentioned before, IDV is based on the current market value of the bike. When the current market value of the bike is determined, along with depreciation, the market value of the bike is also taken into consideration, especially if the market value of the bike is higher than the proposed IDV in bike insurance.

It is extremely important to understand what IDV is and how it is calculated. The premium that you pay for your bike insurance is significantly affected by the IDV of your bike. IDV is one of the essential factors in determining not only the insurance premium but also the amount of the claim settlement paid to the policyholder. During the policy acquisition, IDV determines the value of your bike. The premium amount increases in direct proportion to the IDV disclosed by the policyholder. Thus, it is best recommended that you should estimate a realistic IDV rather than a lower or higher amount because doing otherwise could cause problems during the claim process.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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