What is an Insured Declared Value?
Insured declared value (IDV) refers to the maximum amount that the insurer will pay if any vehicle is damaged or beyond repair or is stolen. For instance, if the market value of a two-wheeler car is Rs. 50,000, the insurer will pay a similar amount to the customer in any of the above-mentioned cases. Although IDV changes every year due to depreciation, it plays a crucial role while purchasing two-wheeler insurance. IDV influences the reimbursement amount to be received by the owner to settle the expenses of repair and damage.
A customer is liable to get the maximum value of IDV only when his vehicle gets stolen or sustains damage beyond repair. The higher the premium amount, the higher the IDV. In other words, IDV refers to the current market value of the two wheeler, and it is valid only under the comprehensive bike insurance policy.
How is IDV Calculated for Two Wheelers?
Recently, the use of IDV calculators for two wheelers has proved to be one of the most efficient and time-conserving calculator tools. This is because IDV calculates the vehicle’s depreciation value according to the manufacturer’s specifications and not by the value one can personally sell at. The following factors are considered before the calculation of IDV in two wheeler insurance:
- The model of the two wheeler: The expenses mostly depend on the make and model of the vehicle. Hence, it is to be properly observed before the calculation of IDV.
- Registration details of the vehicle: This is another significant information that would help determine the IDV.
- Age of the vehicle: It is one of the major factors that is considered before calculating the IDV. As the current market value is represented by it, knowing the age of the car is of great importance.
- Depreciation: The depreciation of a vehicle is calculated on the basis of the Indian Motor Tariff from the day of its purchase. The depreciation percentage increases with each year. So as the vehicle ages, IDV decreases, as well as the premium. The better condition your bike is in, the higher would be its IDV.
- Other factors: IDV also depends on the period and type of policy as well as the type of fuel used.
Especially in the case of bike insurance, the IDV is calculated based on manufacturers’ selling price and depreciation over the years. The registration cost, road tax, and insurance cost are excluded from this. Also, the cost of accessories that have been purchased later is not included in it.
If a two-wheeler is more than five years old, then the calculation becomes a bit different. In the first year, the deprivation value is 5% but can go upto 50% in the next 4-5 years. It is by seeing the condition of the two-wheeler, the insurer will essentially decide the amount. Therefore, it is advised that vehicles that are more than five years old are better to be sold as long as it is in proper working conditions.
Why is IDV so Essential for Renewal Of Bike Insurance?
It is extremely necessary for an owner to have a proper IDV when they buy two wheeler insurance or attempt to renew it. As at times, there are many insurance providers who provide low premium products, thus lowering the IDV. This is very problematic for the policyholders at the time of claim for any theft or accidents. They would receive a much lesser amount than the market value of the two-wheeler.
As IDV reflects the current market value of a given vehicle, it directly affects the insurance premium during renewal. Therefore, IDV is directly proportional to the premium because of which it has a great influence on two wheeler insurance. If you deliberately show a lesser IDV of your bike, the premium amount to be paid will get increased.
Significance of IDV in Two Wheeler Insurance During Renewal
The importance of IDV lies in determining the real value of a two-wheeler and the premium amount that is to be paid.
Insurance Premium Depends On It
The premium of a two wheeler insurance is dependent on a lot of factors such as the type of policy, model of the two-wheeler, the city that it is registered, and most importantly, the IDV. The current market value of your bike can have the most direct effect at the time of insurance renewal.
Provides The Right Value For Your Two-wheeler
It is your vehicle’s IDV that determines the correct value for two-wheelers. It takes into account a lot of external factors like the model, age, cubic capacity, etc., before doing the calculations. Therefore, it is important to have the proper IDV for your two-wheeler insurance.
The Claim Amount Of Policyholders Depends On IDV
The IDV is nothing but the maximum amount that is to be received by the policyholders in case of severe damages and losses. Sometimes, many people incorrectly state their IDV so as to reduce the premium amount, but this only tends to be a disadvantage at the time of claim, as the amount received by the policyholder might be much less.
IDV also plays a significant role in the case of selling the two-wheelers. Along with aspects like usage, past car insurance claims, etc., a higher IDV will get a higher price. Therefore, not just in getting claims settled or renewing the two wheeler insurance, IDV also determines the resale value of a vehicle. All in all, it is the foundation for any two wheeler insurance.