• Declaration Value Of The Two Wheeler

    Two Wheeler Insurance
    • Protect yourself with long-term third party cover
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    From the moment you ride a two-wheeler out of the showroom, depreciation is calculated on the vehicle. It is a legal requirement for all vehicle owners to purchase a motor insurance cover. While the premium payable for a third-party liability insurance policy is predetermined by the Insurance Regulatory and Development Authority of India (IRDAI), the premium payable for a comprehensive/package/bundled two-wheeler insurance policy is decided by the insurance provider. The premium, in this case, will vary based on a number of factors, including the Insured Declared Value (IDV) of the vehicle. Declaring the correct IDV is essential to determine the right premium amount.

    What is the Insured Declared Value?

    The Insured Declared Value or the IDV is the maximum sum of money that you, as a policyholder, are entitled to receive from the insurance company if your two-wheeler is lost, stolen, or in the event of a constructive total loss. The IDV of a two-wheeler is calculated by taking the current selling price of the two-wheeler and adjusting this amount for depreciation.

    How to Calculate the IDV

    The formula to calculate the Insured Declared Value of a two-wheeler is as follows:

    IDV = {[The listed selling price of the two-wheeler + sales tax + (accessories that are excluded from the selling price – depreciation)] – (depreciation + cost of the insurance cover + registration costs)}

    Depreciation Percentage Based on the Vehicle’s Age

    Age of the Vehicle Percentage of Depreciation
    Between 0 to 6 months 5%
    Between 6 months to 1 year 15%
    Between 1 to 2 years 20%
    Between 2 to 3 years 30%
    Between 3 to 4 years 40%
    Between 4 to 5 years 50%

    If your two-wheeler is older than 5 years, the IDV will be decided after a mutual agreement between the insurance provider and the policy buyer.

    How Does the IDV Impact the Premium Rate of Your Policy?

    The premium payable for a comprehensive/bundled/package two-wheeler insurance policy is directly proportionate to the Insured Declared Value of the vehicle. When you purchase a two wheeler insurance policy, you will need to declare the IDV of the vehicle to the insurer. A high IDV will result in a higher premium rate, while a low premium will result in a comparatively lower premium rate.

    Should You Declare an IDV that is Different from the Current Market Value of Your Bike?

    It is necessary to declare an IDV that matches the current market value of your vehicle when purchasing a two-wheeler insurance policy. If you declare a lower IDV, your premium payable will reduce. However, you should keep in mind that you will receive a lower settlement from your insurance provider if you happen to raise a claim for vehicular theft, loss of the vehicle, or constructive total loss. On the other hand, while declaring a high IDV will help you get a higher settlement in the event of a claim, you will also have to pay a high premium rate for the policy. Thus, you should ensure that you declare the correct IDV.

    Why You Should Check the IDV When Renewing Your Policy

    The IDV of your two-wheeler will reduce each time you renew the policy, given that the age of the vehicle would have increased. Thus, it is necessary to review the current Insured Declared Value of the vehicle and the premium payable for the policy at the time of renewal. To purchase a two wheeler insurance policy with a competitive premium, it is advisable to compare the premiums quoted by different motor insurance companies.

    In conclusion, it is vital to select the correct IDV when purchasing a two wheeler insurance policy to ensure that you will receive adequate coverage.

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