Renewing Your Bike Insurance? Here’s How IDV Affects Your Premium

Your bike is your prized possession because you spent a considerable amount of money on it that you want to keep it as safeguarded as possible. It has been your reliable companion. Moreover, since your bike is subject to accidents and breakdowns, therefore, it is all the more important that you keep it as insured as possible.

The concept of two-wheeler insurance or bike insurance in India was introduced by the Motor Vehicles Act 1988. And it is mandatory to buy bike insurance otherwise you’ll be an attraction of many penalties on the road.

Most people who buy two-wheeler insurance, however, remain unaware of several things that may be having a bearing on their premium and sum assured.

What is bike insurance/ two-wheeler insurance?

• Two-Wheeler insurance covers you financially against any damage to your bike or injuries sustained by you due to unpredicted events such as accidents, burglary, thefts, riots, strike, or any natural disasters.
• Bike insurance policies also cover your financial liabilities arising out of injuries or damages caused to third parties in an accident.
• The costs involved can make a significant dent in your finances. Two-wheeler insurance policies provide financial protection against such setbacks.

When you go out to buy an insurance policy, you will find many terms in the document that are hard to understand, especially for a common man. One of the critical term that you will come across while buying or renewing your bike insurance is IDV or insured declared value. Knowing IDV is important as the whole concept of buying or renewing your insurance depends on it. So,  it’s essential to know the right IDV so that you get the best insurance policy

What is IDV (Insured Declared Value)?

• IDV is that value which is provided by the insurance company in case of a theft or total loss of the vehicle.
• In another language, it’s the current value of your bike in the market. IDV is the highest sum payable by the insurance company for your bike insurance.
• IDV is the maximum amount that you can claim in case your bike gets damaged or stolen.
• Right IDV is always close to the market value of your vehicle.

How is the insured declared value calculated?

To calculate the IDV, the insurance company uses these following points and then adjusts it with standard depreciation rates-

• Ex-showroom price (the actual cost of the bike, including state tax)
• Description of your bike
• Bike’s model
• Manufacturer
• Bike registration details
• City where your bike is registered
• First purchase or registration date

We know that the insurance company doesn’t consider the on-road cost for valuation, i.e., the registration cost and taxes. IDV calculation is based on

• The market price of the vehicle offered by the manufacturer.
• If the age of your vehicle exceeds over 5 years, IDV will be based on the agreement between the insurance company and insured.
• As per the Insurance Regulatory and Development Authority of India, the maximum insured value for your vehicle can be 95% of its ex-showroom price.
• Therefore, within six months of the purchase, the value of your bike or car will depreciate by 5%.

The value of the depreciation of your bike is based on the following schedule:

 How IDV affects your premium at the time of bike insurance renewal?

When you place an inquiry for a renewal of your bike insurance, you might not get the value that is worthy of your vehicle’s current condition, and you might end up getting a much lower amount for your vehicle.

The IDV of your bike is directly proportional to your insurance premium. As IDV increases with time because of depreciation, the premium you pay will also increase. Higher IDV means a higher premium. As your bike ages, premium increases.

Choose the right policy

What is the right policy? It is the right IDV you choose for your bike as IDV is the maximum amount that you can claim for your motorcycle in case of any damage or loss of your vehicle.

You should look for the following things:

• Do not settle for insurance that has lower IDV, to save the cost of insurance premium.
• It will cost you a lot in the future as only IDV is taken into consideration at the time of claim.
• IDV should be close to the market value of your bike as this will ensure the right compensation at the time of any damage or theft.
• Also, remember if IDV of your bike is more than five years old, it is based on an agreement between an insurer and insured.

For every bike holder, it is essential to know about IDV when it comes to buy or renew your bike insurance. Your bike takes you to your destination; it’s time that you will take care of your bike.

Safe ride, happy life!