What is IDV? — Two Wheeler Insurance Declared Value
Accidents or theft are the worse events any two-wheeler owner has to face. It not only affects the rider(s) in terms of injury but affects the wallet of the vehicle owner as well. In such cases, a two-wheeler insurance policy comes in handy, always.
While the policy takes care of repair expenses and even pays a sum assured in case of temporary or permanent disability suffered by the driver, what happens if the vehicle suffers irreparable damage or is stolen? That’s when the IDV or Insured Declared Value comes into play.
What?
If during the policy period, the insured two-wheeler suffers irreparable damage or is stolen, the policyholder is paid the lump sum amount. This amount is called the IDV.
How does one calculate it?
The sum assured is arrived at using a simple formula. Bike manufacturer’s current listed selling price is adjusted for depreciation and the resultant sum is the IDV. Remember any modification or additions to the vehicle which aren’t factory fitted come at an extra cost.
IDV = Manufacturer’s Listed Selling Price — Depreciation
- According to the Insurance Regulatory and Development Authority (IRDA), maximum IDV permitted is 95% of its ex-showroom price.
- Take a look at the depreciation chart below.
As the bike ages, its upkeep becomes expensive because depreciations increase as well. Therefore, a new bike will fetch a higher IDV compared to an old one.
Should one lower IDV to pay a lower premium?
No, this is a wrong way to go about saving money on 2 wheeler insurance. An IDV is the total sum a policyholder receives in case of total loss or theft of the vehicle. To save a bit of premium money can cause a heavier loss at the time of claims filing.
And declaring a high IDV does not make sense as well. For one, the policyholder will have to pay higher premiums and second at the time of claim filings, the insurance company will only consider the current depreciation and selling price of the two-wheeler — the IDV paid may not match expectations.
The best option is to arrive at an IDV which is just right using the age of the two-wheeler and its depreciation into consideration.
