Guide to IDV in Bike Insurance

What is IDV in Two-Wheeler Insurance:

In two-wheeler insurance, IDV stands for Insured Declared Value the insured declared value (IDV) represents the maximum coverage limit for your bike. The insurance coverage will pay out this amount in the event of a complete loss of the two-wheeler or an irretrievable theft. The insured declared value refers to your bike's current market value.

For Example: If the bike's price at the time of purchase was ₹1 lakh rupees, the insured declared value (IDV) would be reduced by 5% for the first six months of ownership. In other words, if your bike is stolen on the first day after you insure it, the highest amount you can claim is ₹95,000, not the full ₹1 lakh rupees.

There is consensus that the average lifespan of a two-wheeler is 5 years. As a result, we spread out and reduced the overall cost of the bicycle over a five-year period. The depreciation is minimal at the beginning and progressively grows with each subsequent year. The resale market for used motorcycles would show a similar trend.

When insuring a bike older than five years, the insurer and the insured mutually determine the insured's declared value (IDV). This is because the depreciated value covers more than just the scrap value of the two-wheeler's components.

The importance and significance of individualism differ from collectivism: IDV refers to the insurer's maximum liability in the event of theft or total loss of your bike. A total loss occurs when the cost of repairing a two-wheeler to make it roadworthy is significantly higher than the vehicle's value. Usually, the insurance company would consider the bike a complete loss if the expense of fixing it exceeded 75% of the insured declared value (IDV).

The IRDAI specifies a formula for calculating the bike's precise insured declared value (IDV). However, you have the flexibility to adjust it by 15% in any direction. The higher the IDV, the higher the premium you'll have to pay. If both the insurer and the insured have agreed upon a higher insured declared value (IDV), you will get a greater amount as compensation in the event of a complete loss or theft. However, it is not advisable to excessively raise the insured declared value (IDV), as it would result in paying a higher premium without receiving any further benefits.

It is not advisable to decrease the insured declared value (IDV) solely to reduce insurance rates. Firstly, this would result in inadequate compensation in the event of theft or complete loss, necessitating a larger out-of-pocket expense to obtain a replacement. Furthermore, if the insurer determines that the insured's declared worth (IDV) is significantly less than the actual value of the bike, they will settle all claims proportionately.

For instance, if you designate the IDV as ₹75,000, despite the calculation indicating it should be ₹1 lakh, your two-wheeler insurance policy will only reimburse 75% of your claims, leaving you to cover the remaining 25% out of your own funds.

Calculating the Insured Declared Value (IDV): We determine a two-wheeler's insured declared value (IDV) by taking into account the vehicle's original selling price at the time of purchase and the amount of time that has passed since then. The IRDAI publishes a schedule that guides the depreciation value calculation. Below, you can view the current depreciation schedule.

The percentage of vehicle age depreciation goes towards IDV repair
This study examines the impact of insured declared value (IDV) on two-wheeler insurance rates.

The insured declared value (IDV) of your two-wheeler directly affects the premium amount you are required to pay for your two-wheeler insurance. The insured declared value (IDV) determines the largest amount an insurer must pay, and a lower IDV reduces the insurer's liability. Consequently, the insurer can charge a lesser premium for two-wheeler insurance.

However, having an excessively low insured declared value (IDV) can be expensive if you need to file a claim. The consideration of IDV, rather than the actual market value of the bike, is the basis for fulfilling claims. Consequently, a decrease in the insured declared value (IDV) would lead to a reduced compensation amount, necessitating a greater personal expenditure to obtain a replacement bicycle.

Depreciation Rates for Two-Wheeler Insured Declared Value (IDV): The IRDAI determines the depreciation rates for two-wheelers. The IRDAI regularly updates these rates to reflect the current market conditions. The existing depreciation timetable for motorcycles is as follows. For repairs, we apply the vehicle's age percent of depreciation to the insured declared value (IDV).

Depreciated value assessment for motorcycles that are five years old or older

The insurer and yourself mutually agree to establish the insured's declared value if your bike is more than five years old or belongs to a discontinued model.

The insurance provider must renew your two-wheeler insurance policy if you have maintained uninterrupted coverage for the past five years and cannot deny it. However, it is unlikely that most add-on insurance will be accessible for more than five years. This encompasses many types of coverage, such as zero-depreciation insurance, engine and gearbox protection, and return-to-invoice coverage.

In addition, certain insurers may increase the price of an older bike due to its higher likelihood of experiencing mechanical failure in the near future. This may occasionally make it too expensive for some motorcycle owners. To determine the optimal two-wheeler insurance coverage, it is advisable to examine the various offerings. However, the rate for third-party bike insurance remains unchanged as required by law.

Consequently, many older bikes rely solely on a third-party two-wheeler insurance policy and a personal accident policy for protection, leaving the bicycle itself vulnerable to damage.

The identity verification (IDV) process occurs during policy renewal: The Insurance Regulatory and Development Authority of India (IRDAI) sets the depreciation schedule, which insurers typically use to calculate the insured's declared value (IDV) during the renewal process. However, you should not accept the insurer's suggested alteration. You should evaluate the new insured declared value (IDV) in relation to the prevailing market price of your two-wheeler. Additionally, it is advisable to verify whether the insurer has appropriately decreased the damage premium.

If you determine that your bike's insured declared value (IDV) is either too low or too high in comparison to the market value, you should request that the insurer adjust the IDV accordingly. As previously mentioned, insurers typically provide a range of plus or minus 15% for selecting the insured declared value (IDV). Similarly, you can negotiate with the insurance company or compare the premiums offered by other insurers for a similar bike insurance policy if you believe the premium you are paying is excessive compared to the insured's declared value (IDV).

It is critical to keep in mind that the IDV only impacts the damage premium. The IRDAI determines the rate for third-party two-wheeler insurance based on your bike's cubic capacity. Similarly, the two-wheeler's market value does not affect the cost of personal accident insurance.


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