One of the first few things to look for when purchasing a bike insurance policy is its Insured Declared Value or IDV. But did you know why IDV is such a critical component? The main reason for placing such a high emphasis on IDV is that it determines how much compensation you can receive from your insurance company after an accident.
If you don’t want to be in the dark when raising a claim, here are some facts to know about IDV when choosing your bike insurance plan.
The Basics of IDV
IDV or insured declared value is the maximum amount which the insurance company pays and this amount is specified in the insurance contract. Situations like accidents that result in a total loss or constructive total loss or even theft bring IDV into the picture. It is often misconstrued to be the resale value of your two-wheeler, however, that isn’t the truth. IDV is the value of your vehicle after considering its age. In simple terms, it is the value of your two-wheeler in its existing condition. Further, IDV is a crucial component in determining the bike insurance price.
Calculation of IDV
Calculating the IDV is a complex process, but as a policyholder, you need not worry about it. The insurer calculates this amount for you. General Regulation 8 (GR. 8) of the Indian Motor Tariff mentions the method to calculate the IDV. The manufacturer’s listed selling price for the model and make of your bike is adjusted for depreciation to arrive at the IDV. Further, the accessories fitted that are otherwise excluded from the above calculation are also considered after adjusting for depreciation.
It is mathematically expressed as follows:
Insured declared value (IDV) = (Listing price of the manufacturer – Depreciation) + (Accessories fitted – Depreciation on such accessories)
The costs of registration and the state taxes are excluded when calculating the IDV of your vehicle. The GR. 8 of the Indian Motor Tariff has prescribed standardised rates for determining depreciation based on the age of the vehicle.
| Age of the vehicle | Rate of Depreciation for determining IDV | Effective IDV |
| Not more than 6 months | 5% | 95% |
| More than 6 months but not more than 1 year | 15% | 85% |
| More than 1 year but not more than 2 years | 20% | 80% |
| More than 2 years but not more than 3 years | 30% | 70% |
| More than 3 years but not more than 4 years | 40% | 60% |
| More than 4 years but not more than 5 years | 50% | 50% |
* Standard T&C Apply
For vehicles older than five years, the IDV is determined mutually between the policyholder and the insurance company.
Setting the right IDV
Setting the right IDV in your comprehensive insurance policy is crucial. This is because the maximum compensation that the insurance company pays is based on the value of the IDV. While insurance companies allow altering the IDV within a specified range, under setting the IDV will save premiums but may lead to a financial loss in the future. On the other hand, over setting the IDV can result in an increased burden of insurance premiums. Hence, setting the right IDV is critical for a balance between financial coverage and premium costs. To know how the IDV impacts your premium, you can make use of a two wheeler insurance premium calculator.
* Standard T&C Apply
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.
