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The Insured Declared Value or IDV of a vehicle is a key factor in determining the premium amount that one will have to pay at the time of purchasing or renewing a two wheeler insurance policy. The Insured Declared Value of a particular vehicle is indicative of the current market value of the vehicle. Thus, it is the maximum sum of money that will be paid by the insurer to the policyholder in the event of a vehicular theft or constructive total loss. Read on to know more about why the Insured Declared Value is important.
The IDV is calculated by taking the selling price of the two-wheeler into account and adjusting this sum for depreciation. Thus, as time progresses, the IDV of your two-wheeler will keep reducing. The formula to calculate the IDV of a two-wheeler is as follows:
IDV = (Manufacturer’s listing price – Depreciation) + (Accessories and extra fittings that are not included in the listed selling price – Depreciation)
The depreciation schedule and Insured Declared Value based on the age of the bike are as follows:
|Age of the Two-Wheeler||Depreciation Rate||Insured Declared Value|
|Up to 6 months||5%||95% of the ex-showroom value of the vehicle|
|Between 6 months and 1 year||15%||85% of the ex-showroom value of the vehicle|
|Between 1 year and 2 years||20%||80% of the ex-showroom value of the vehicle|
|Between 2 years and 3 years||30%||70% of the ex-showroom value of the vehicle|
|Between 3 years and 4 years||40%||60% of the ex-showroom value of the vehicle|
|Between 4 years and 5 years||50%||50% of the ex-showroom value of the vehicle|
Keep in mind that for vehicles that are older than 5 years, the Insured Declared Value will be mutually agreed upon by the insurance provider and the policy buyer.
Apart from the depreciation rate and the ex-showroom price of the vehicle, the insurance provider may also take into account factors such as the make of the two-wheeler, model of the vehicle, manufacturer details, registration details, etc., to calculate the IDV.
If you purchase a comprehensive/bundled/package two wheeler insurance policy, the Insured Declared Value of the vehicle is one of the key factors that is taken into account to decide the premium rate of the policy. Thus, the more a vehicle ages, the lesser will be the IDV, which, in turn, will result in a lower payable premium. A few other factors that are taken into account to calculate the premium quote for a comprehensive/bundled/package two wheeler insurance policy include the manufacturing year of the vehicle, No Claim Bonus (if applicable), add-ons opted for, geographical location of the policy buyer, etc.
The two wheeler insurance premium calculator, which is available on the official websites of most motor insurance providers and on third-party insurance comparison websites, is an online tool that helps you calculate the premium payable for a policy. Customers and prospective policy buyers can use this tool free of cost. To use the premium calculator tool, you will simply have to navigate to the official website of the insurance provider and input the required details, after which the premium quote will be displayed to you.
Individuals who wish to purchase or renew a two wheeler insurance policy are required to declare the IDV of their two-wheeler. It is necessary to declare the correct IDV, given that it can directly impact the premium payable and the settlement that you will receive in the event of a constructive total loss or vehicular damage.
If you declare an IDV that is lower than the current market value of your two-wheeler, the insurer will offer you a lower premium quote. However, if you happen to raise a claim for vehicular theft or constructive total loss, the settlement you receive will also be less, which will result in you having to incur significant losses. On the other hand, if you declare an IDV that is much higher than the current market value of the vehicle, you will be required to pay a higher premium for the policy. Thus, make sure to correctly assess and declare the IDV of your two-wheeler.
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