Declaration Value of the Bike

Sometimes, the insurance which comes along with the vehicle isn't enough. We need is a comprehensive coverage plan that would protect the vehicle entirely-from third-party damages which may incur due to accidents and the medical expenses of the passenger involved.

A comprehensive insurance policy has two parts:

• Own Damage (OD)

• Third-party Damage

For OD you will receive coverage for damages/loss of your vehicle (which include damages caused due to accidents, natural and man-made calamities).

The third-party cover helps the liable driver to compensate for the damages caused to other people/vehicle due to an accident. This includes accidental damages that result in the death of a person or permanent/severe injuries of the person involved in the accident. This also provides coverage to the damages caused to the surrounding property.

The premium for your bike insurance is calculated by using the “Insured Declared Value” (IDV). The third-party premium is calculated depending on the vehicle category. This is not linked to the IDV of the bike. Premiums tend to increase rapidly due to the high inflation rates. So, what can be done to save on your bike insurance premium? One possibility is to purchase anti-theft devices and own the benefit of getting a discount on the premiums. You can also use the No Claim Bonus if you haven't claimed the insurance for more than a year. No Claim Bonus can offer discounts on the premium rates or provide additional coverage. One of the frequent mistakes which the customers do is following unfavorable means to claim a discount on the premiums. It is essential for you to know the IDV value of your vehicle since it is the fundamental deciding value for the insurance premium of your bike.

How Does IDV Impact A Two Wheeler Insurance Policy?

The declared value of the insured plays an essential part in the determination of the amount of premium payable and the amount that you receive after making an insurance claim. The higher the value of IDV of your bike, the higher is the premium applicable. The IDV is the basis for determining the premium.

Selecting A Different IDV Than The Market Value

You can modify the IDV in two ways. Either you can accept a higher IDV than the market value of your bike, or you can choose a lower IDV for your bike as compared to its market value. Both scenarios will have a different result on your claim and premium amount.

Choosing A Lower IDV

If the IDV selected by you is lesser than the market value of your bike, the premium rate would be relatively less since it is directly proportional to the IDV. A lower IDV can help you in saving a portion of the premium cost but if you make a claim, the compensated amount will be less as well so you might end up spending from your pocket.

Choosing A Higher IDV

IDV is the maximum sum assured by an insurer if there is a complete loss of the vehicle. If you select a higher IDV, you will get higher compensation if you make a claim, but you will also be needed to pay a higher premium rate on your policy. You must note that a greater IDV will not help you sell your vehicle at a higher price than the market value of the same.

Thus, it is the most feasible to choose an IDV which is close to the market value of your two-wheeler. This way you can pay the reasonable amount of premium on your policy and claim the right compensation at the time of claims.

Calculation of IDV For Two Wheeler Insurance

IDV is the highest amount that an insurer is liable to pay in case of a complete loss of your bike or scooter. The IDV of your motorcycle depends on the selling price of the bike. It also takes into account the depreciation of the vehicle depending on the vehicle's age.

Check The IDV During Policy Renewal

At the time of insurance renewal, you must check if the premium you are paying for your bike is justifiable depending on the IDV of the vehicle. If you are unsatisfied with the IDV that is offered by your insurer or the premium payable, you can negotiate with the insurer for getting the coverage that you wish to get.

What is an IDV?

IDV is the sum insured and it is estimated at the beginning of the policy period of an insured vehicle. IDV is estimated based on the manufacturer’s listed selling price. Then, according to Indian Motor Tariff, the standard depreciation rates is used to find out the final value of the vehicle. IDV, in other words, is the highest amount that your insurance company can pay you when you make a claim. This is the maximum that you will be required to pay if your vehicle has undergone complete loss or is stolen or when the constructive total loss and repair of the vehicle is higher than 75% of IDV. You should keep in mind that the rate of depreciation declines with the increase in the car's age. This implies, if you make an insurance claim for a new vehicle, you will be offered the maximum IDV. However, as the vehicle ages, the depreciation rate keeps increasing. The vehicle's age is the standard metric which determines the rate of depreciation. Thus the older is the vehicle; the less is the value of IDV. If your bike is more than four years old/or is an ancient model, you can't expect much from the insurer.

When the IDV is estimated (while purchasing the vehicle or while renewing the policy), the price while purchasing the vehicle isn't acknowledged but the selling price of the model the brand. You must avoid declaring a lower IDV than the market value. If you do so, you end up incurring a loss. The amount that you'll receive will be lesser than the amount you would have received if you would have declared an IDV equal to the market value of the vehicle. Moreover, you can save on the long-run if you claim the correct amount and avoid trying to save up on the premiums by declaring a lower IDV. Making the correct IDV declaration will ensure that you can get the maximum compensation if your vehicle has been stolen.

If you think that you can deceive the insurer by declaring a high IDV, you will be mistaken. This is because when the claim is processed, the age of the vehicle is considered by the insurer. Thus the depreciation before finalizing the claim depends on this. Consequently, you'll end up getting a low compensation amount despite the high IDV that you had declared. In conclusion, you must ensure that when you're declaring your IDV, it is in sync with the age and model of the vehicle.