Insured Declared Value, or IDV, is the maximum amount of money that the insurer covers you for in case of complete loss or theft of your vehicle. The IDV is generally set as close to the current market value of your vehicle. The concept of IDV is only applicable to the own–damage component of your bike insurance policy. To be able to get the right coverage for your bike, it is quite important to understand how IDV is calculated in two–wheeler insurance.What are the factors that affect the IDV of your bike insurance policy?
Some of the factors that play a significant role in your IDV calculation are:
- Area of registration of the vehicle
- The make and model of your bike
- The depreciation faced by your bike
- Accessories that have been fitted
Depreciation is the reduction in the market value of your bike. It typically depends on how long you have used your vehicle. For example, if you buy a bike tomorrow for Rs 1 lakh, its market value will not remain the same over time. In fact, the market value of your bike drops by about 5% as soon as it leaves the showroom! Insurers take the depreciation of your bike into account and subtract the same from the market price of your vehicle.A bike that is less than six months old will only have a depreciation of around 5%, whereas a bike that is around four years will have a depreciation that is at 50%. This heavily impacts the compensation you get when you raise a claim.
Depreciation is not only considered for the bike but also for the different parts of the bike. For example, a few bike parts that are made of rubber/nylon undergo a depreciation of about 50% over the years, while the components that are made of fibre glass undergo a depreciation of about 30%.
The insurer always subtracts the depreciation of your bike and its parts from the final IDV that is offered by them. To get the maximum coverage value, you can opt to buy a zero–depreciation add–on along with your comprehensive bike insurance policy.
How IDV value is calculated for bike insurance?
The formula to calculate depreciation in bike insurance is quite simple to understand. Here is how you can manually calculate the IDV of your bike:
|Calculation of IDV of a modified bike||Calculation of IDV of a non–modified bike|
|IDV = (Price of your Bike – Appropriate depreciation value) + (Price of vehicle’s externally fitted accessories – Their depreciation value).||Insured Declared Value = (Price of the bike – Appropriate depreciation value).|
Manually calculating the IDV can be tiresome, especially if your bike has been heavily modified. There are also chances of making calculation mistakes. However, you can avoid such a hassle and make use of an online IDV calculator. Most leading insurance providers offer this tool on their websites. It is free to use and can prove handy when you are taking a decision on the insurance coverage you want to buy and the premium you are comfortable paying.Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.