20 January,2021 12:33 AM IST | Mumbai | Partnered Content
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Insurer Declared Value, or IDV as it is better known, is one of the most important terms in bike insurance. It might sound like a complex term, but it is actually a very simple concept - to put it in words, IDV is the present market value of your motorcycle. It could also be described as the maximum compensation you will receive in case your vehicle is declared as a total loss.
How is the IDV of my bike calculated?
If your two-wheeler is less than 5 years old, then its IDV is calculated based on its age and the corresponding rate of inflation that is stipulated by the Motor Tariff Act.
For instance, if your motorcycle is less than 6 months old, then 5% depreciation is applicable. This means that the IDV of your bike is 95% of its ex-showroom price.
As your vehicle gets older, its IDV decreases. In fact, once your bike is between 4 and 5 years old, the depreciation applicable is 50%. This means that, after just 4 years, the value of your vehicle will be half of its ex-showroom cost!
After the vehicle exceeds five years of age, its IDV is then set based on mutual decision between the insurer and the bike owner (policyholder).
Can I set the IDV of my own bike insurance plan?
Yes, you can most certainly set the IDV of your plan as per your requirement! The insurance company will estimate your bike's IDV based on its age, depreciation & condition. However, you can either accept their valuation or you can increase/decrease the IDV as per your preference. Let's take a look at what happens if you increase the IDV of your plan.
Increased payouts in case of a claim.
That's right - if you increase the IDV of your plan, you will receive higher compensation in case of a claim. This will help you offset the financial impact of a stolen bike or an accident that leaves your vehicle beyond repair. A large payout will help you buy a new bike with ease.
You have to pay higher premiums.
All good things come at a cost. So, while an increased IDV will bring you higher compensation in case of a claim, it will also invite a heavier price tag! This is because a higher IDV poses a greater risk to the insurance provider and therefore, to cover your bike with a higher IDV, you have to shell out a costlier premium.
How do I check the IDV of my own vehicle?
Well, the easiest way to check the IDV of your vehicle is to use a two-wheeler insurance premium calculator. These online tools tell you how much your plan will cost and also denote the IDV of your vehicle. You can alter the IDV as well and the calculator will accordingly update the premium of the plan. This will help you set the right IDV for your bike based on your coverage needs and your financial requirements.
So yes, it could be a good thing to increase the IDV of your two-wheeler insurance policy. However, be wary of the premium as well - you need to strike a balance between ideal coverage & affordability.
But when is the IDV of my two-wheeler payable?
Now you might be wondering - when exactly does IDV come into play? Well, there are 3 or 4 different scenarios wherein the IDV of your vehicle is provided as compensation. Let's look at some of these instances to get a better idea of the importance of IDV in two-wheeler insurance.
1. Theft: This is one of the most common instances in which the IDV of your motor insurance policy becomes payable to you. If your two-wheeler is stolen, it is gone forever with very little hope of being found in the same condition again. In this scenario, you get paid the IDV as reimbursement for your losses.
When it comes to points 2 and 3, remember that total and constructive loss mostly occur due to accidents. However, it can also be a result of natural calamities such as flooding, earthquakes, etc. In all of these cases, a higher IDV would certainly benefit you. However, you must also bear in mind that all of these occurrences are extremely rare and don't happen that often. Most people spend their entire motoring life without ever having to make a claim, leave alone a claim for a total loss.
In the same breath, one should not lower the IDV thinking that it will never come into play. This is because your bike is exposed to a significant amount of peril, both on the road and off the road. In case of an unfortunate event that leaves your bike beyond repair, a lower IDV will only add to your disappointment. You will be left without a vehicle and very little compensation in hand to get yourself a new one.
To conclude:
Now that you know everything about IDV, we hope you are able to make a smart purchase decision when it comes to your bike insurance policy. Remember that you need to set an IDV that is ideal for you and your bike. You should not set an IDV that's too low or too high. This is because the purpose of your IDV is to offset the financial loss of a vehicle - IDV is not supposed to be used to save money or get greater compensation than justified. Lastly, always wear your helmet whenever you take your bike for a spin, good luck, and ride safe!
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