What is the Insured Declared Value (IDV) of a two-wheeler and how to calculate it?

18 Feb 2019

If you are buying a bike, the first thing that you need to get in order is the insurance for it. And, since it is an absolute essentiality, there are things to be cautious about. Multiple factors need to be looked into when choosing a suitable insurance policy for your two-wheeler, whether at the time of purchase or during subsequent renewals. One of those is IDV in bike insurance. Now, if you want to know more about IDV in bike insurance – i.e. what it is, how it is calculated, what is an IDV calculator, what are the things that need to be considered while calculating IDV in bike insurance and so on – then read on.

IDV, which stands for Insured Declared Value, is nothing but the Insurance value of your two-wheeler. In case of theft or total damage to your vehicle, IDV is the sum provided to you by the insurance provider. It is calculated as per the method mentioned in India Motor Tariff. IDV is one of the factors which decides the amount of premium you end up paying to cover your two-wheeler.

What is IDV and what IDV means in bike insurance?

IDV, which stands for Insured Declared Value, is nothing but the Insurance value of your vehicle. In case of theft or total damage to your vehicle, IDV is the sum provided to you by the insurance provider. It is calculated as per the method mentioned in India Motor Tariff. IDV is one of the factors which decides the amount of premium you end up paying to cover your vehicle. For two-wheelers, the clauses are the same as any other vehicles. So if you are buying a bike or a scooter, you need to consider the factors that have been discussed above.

What is an IDV calculator and how it is used?

IDV calculators which are found online is a tool that helps you to figure it out in the easiest possible way. While taking into account the age and the depreciation value of the bike, it determines the market value of the bike and also how much premium you should be paying for it. It is often assumed to the one of the most important calculators used under the vehicle insurance segment and is used for calculating the total amount to be paid in case of total damage or theft of the vehicle.

The formula used to calculate IDV is given below:

IDV= (Manufacturer's listed selling price- depreciation) + (Accessories not included in listed selling price - depreciation) excluding registration and insurance costs.

So, while calculating IDV for your two-wheeler, insurance and registration costs are excluded. Any accessories that do not come as a standard fitting with your two-wheeler are also excluded. This point should be noted to avoid any misunderstanding or disappointment when you raise a claim. But, if you feel the need to insure any non-standard component/accessory, you can go ahead and do it at an additional cost.

As we can see, the equation for calculating IDV includes the term 'depreciation'. Depreciation is applicable as per the Depreciation chart provided by the India Motor Tariff.

So, when you buy a new two-wheeler, the IDV is equal to 95% of the listed selling price provided by the manufacturer. Over time, IDV is reduced owing to the age of the vehicle and other factors. Hence, the IDV of a four-year-old two-wheeler is less than a brand new two-wheeler. You can easily calculate the IDV in bike insurance by using the IDV calculators that are found online.

Factors that determine the IDV of your two-wheeler

There are several factors that help you determine the correct IDV for your bike. The first factor is for how long the bike has been used or the age of the bike. The longer it has been used, the lower is its IDV. The second factor is make and the model of your bike. That is because the make and the model of the vehicle determines what would be the repair cost. If repair cost is high, then the IDV will also be on the higher side. The third factor in this case is the depreciation value. The value of any vehicle depreciates over time, and this directly affects the IDV for the insurance concerned. Another factor here is the city in which the bike has been registered. A bike registered in a metropolitan city like Delhi, Mumbai or Bengaluru, where the traffic rate is higher, has a bigger risk of damage or accidents as compared to B-towns like Indore, Lucknow or even Pune. Hence, the city from where you have registered your vehicle also affects the IDV directly. Keep these factors in mind while calculating IDV.

Some of the challenges involving IDV

While searching online or offline for renewal of your two-wheeler insurance, you may come across widely varying quotations of premium. One of the reasons for this may be the lower IDV being offered by the insurance providers. As stated earlier, IDV plays a part in deciding the final premium you pay for the cover. Should you choose to go with an offer which quotes a lesser IDV for your vehicle, you end up paying a lesser premium amount. While this joy is momentary, the real problem arises when you raise a claim for total damage or loss of your two-wheeler. It is certain that you will be disappointed as you end up getting a much lesser amount as compensation by the insurance provider as the IDV agreed to be lower than the actual value of the vehicle. So it is wise and advisable to keep the appropriate IDV, to avoid any future losses.

It is also not advisable to claim a higher IDV than is rationally accepted, hoping to be compensated handsomely in case of theft or total loss of the vehicle. The insurance provider will invariably investigate all such claims, and the disproportionate declaration of IDV will come to light and land you in trouble. And the easiest way to know your right IDV for your bike insurance is by using an IDV calculator

Disclaimer:It is also not advisable to claim a higher IDV than is rationally accepted, hoping to be compensated handsomely in case of theft or total loss of the vehicle. The insurance provider will invariably investigate all such claims, and the disproportionate declaration of IDV will come to light and land you in trouble. And the easiest way to know your right IDV for your bike insurance is by using an IDV calculator