While buying an insurance policy, it becomes quite difficult for a common man to understand several jargons that are there in a document. IDV or insured declared value is one such important term that you will come across while buying or renewing your bike or car insurance policy. Thus, it’s important for you to know everything about it as the whole concept of buying or renewing your bike insurance depends on it. Bike owners must explore each and everything associated with IDV. So, let’s go to the basics as it’s important to know the right IDV so that you get the best bike insurance policy –
What is Insured Declared Value?
Insured Declared Value or IDV is the final value of money that an insurance company which is provided by the insurance company in case of a theft or total loss of vehicle. In a layman’s language, it’s the current market value of your car. It’s the highest sum payable by the insurance company for a bike insurance policy. In fact, it’s the maximum amount that you can claim within the policy period if your bike gets damaged or stolen. So, if your bike gets completely damaged due to an accident or if it gets stolen, IDV is the amount that will be paid by an insurer as compensation. It’s always better to get an IDV that is close to the market value of your vehicle.
How insured declared value is calculated?
In order to calculate the IDV, insurance company uses these following points and then adjusts it with standard depreciation rates as per the Indian Motor Tariff Act –
- Bike registration details
- City where the vehicle is registered
- First purchase or registration date
- Ex-showroom price (actual price of the vehicle, including state tax)
- Vehicle description
- Model of the vehicle
Insured declared value or IDV = (Manufacturer’s listing price – Depreciation) + Accessories not included in the listed price – Depreciation)
In addition to this, we should keep in mind that the insurance company does not consider the on-road cost for valuation, i.e. the registration cost and taxes. IDV is calculated on the basis of the market price offered by the manufacturer, which is also known as the maximum retail price of the vehicle. Manufacturer’s listed selling price includes local duties/taxes; it excludes registration and insurance. For the vehicle that exceeds over 5 years of age, IDV will be the value agreed between 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 depreciation value of your bike or car is based on the following schedule:
|Vehicle’s Age||Depreciation rate|
|Not more than 6 months||5% Depreciation is deducted|
|Exceeding 6 months but not more than 1 year||15% Depreciation is deducted|
|Exceeding 1 year but not more than 2 years||20% Depreciation is deducted|
|Exceeding 2 years but not more than 3 years||30% Depreciation is deducted|
|Exceeding 3 years but not more than 4 years||40% Depreciation is deducted|
|Exceeding 4 years but not more than 5 years||50% Depreciation is deducted|
How is bike insurance premium based on IDV?
The premium that you will be paying for your bike insurance renewal has a lot to do with the IDV, both of which go hand in hand. Insurance premium is directly proportional to the IDV. Higher IDV means higher premium and vice versa. Therefore, as your bike ages, the premium decreases.
Depreciation in IDV rates -
Depreciation plays an important role at the time of calculating the IDV. Depreciation is the core behind calculating IDV and the calculation starts from the very first day when your bike is out of the showroom. Depreciation is basically the reduction in the value of the vehicle when it comes out of the showroom.
Right policy means right IDV:
It’s important to remember that the right policy comes when you choose the right IDV for your bike as IDV is the maximum amount that one can claim in case of loss or damage of the vehicle. For example, if your bike gets stolen just after 5 months of its purchase, you don’t have to worry as your insurance company will pay you on the basis of your IDV. And if you have chosen an insurance that has lower premium instead of higher IDV, then don’t you think it’s a loss. You would surely want the best and the maximum amount as reimbursement. Ideally, insured declared value should be close to the market value of your car so that in the event of any mishap or theft, you are compensated for it accordingly.
Know the importance of IDV –
An IDV is the amount that the insured is compensated in case the bike gets stolen or suffers damage beyond repairs. Ideally, insured declared value should be close to the market value of your bike so that in case of theft or damage, you get compensated accordingly.
Important Things to Keep in Mind –
- Check IDV before purchase
- Choose your insurance wisely
- Important to note that your policy runs around IDV
Also, do not understate the IDV by just quoting a figure that is lower than the actual market value of your bike as this means you will have to pay lesser premium and also, you will get lesser insurance cover. Likewise, do not overstate the IDV just by thinking that the claim amount will increase. A higher IDV will not get you a higher price when you are selling a vehicle.
Henceforth, it is important for every bike holder/owner to know about the IDV when it comes to buy or renew the insurance policy. Also, one must go for a stable IDV so that an insurance company can effectively settle down the claims and you don’t have to pay anything from your pockets.
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