What Is IDV under Two Wheeler Motor Insurance Plan and Why Is It Important?

The maximum sum assured determined by the insurance provider is called the insured declared value (IDV). In other words, IDV is a major factor in determining the reimbursement amount that a policyholder will receive in case of theft or total loss of the vehicle.

Read this article to know more about insured declared value.

There are various factors that a policy buyer must consider while purchasing or renewing two-wheeler insurance. One of them is IDV. This is because IDV has a direct impact on the premium amount.

IDV impacts the amount of reimbursement a policyholder will get in order to repair or replace his/her bike. It is the maximum claim amount that a policyholder will receive if his/her bike gets stolen or suffers from a total loss due to an accident. IDV is the current market value of a two-wheeler.

How is IDV Calculated?

IDV is not calculated on the price at which the two-wheeler was purchased. Instead, it is calculated based on the bike’s selling price as listed by the manufacturer. Then it is adjusted for depreciation. Depreciation is a rate by which insurance providers determine the loss in value of a two-wheeler because of wear and tear, ageing, etc.

The below table sheds light on how depreciation impacts the IDV-

Two-Wheeler’s Age Depreciation Percent Deducted to Determine IDV
Not more than six months old 5%
Between 6 months and 1 year 15%
Between 1 year and 2 years 20%
Between 2 years and 3 years 30%
Between 3 years and 4 years 40%
Between 4 years and 5 years 50%

Factors That Impact the IDV

Some of the factors that affect insured declared value are-

  • The two-wheeler’s age
  • The registration date of the two-wheeler
  • City of registration
  • The make, model, and type of the two-wheeler
  • Fuel type

The Importance of IDV

IDV directly impacts the compensation amount a policyholder will receive in case of theft/total loss of the two-wheeler. Therefore, it is of utmost importance to choose an ideal IDV amount while purchasing two wheeler motor insurance.

In some cases, insurance companies might offer to lower the IDV by 5-10%. If a customer chooses to lower the IDV, then his/her premium amount will go down. However, many experts recommend selecting an ideal IDV amount instead of a lower IDV amount. This way, a policyholder can receive an adequate cover amount in case of a theft or accident.

What Happens If a Policyholder Selects a Wrong IDV?

In order to receive sufficient cover, a policyholder must consider selecting an IDV amount that is closest to the two-wheeler’s current market value. Declaring a lower IDV might help a policyholder save some money, but it might also lead to a lower compensation amount in case of theft or total loss of the vehicle.

In conclusion, IDV is one of the critical factors determining the premium amount of two wheeler insurance. Therefore, you need to calculate the value correctly before finalising the IDV.