Two-wheelers have always been a popular mode of transportation in India. Quite economical compared to cars, two-wheelers also make it easy to drive through narrow roads and lanes. So, if you have a bike, it is extremely important to secure it with an insurance policy.
And, when it is about two-wheeler insurance, it is important to know about IDV. But, what exactly is IDV and why is it considered important? Let’s dive into the details.
What is IDV in Bike Insurance?
Insured declared value (or IDV), refers to the amount, which the insurance company has to pay in case your two-wheeler is totally damaged or is stolen. Usually, the amount is the current market value of your bike or two-wheeler.
For instance, if your bike gets stolen and its market value is Rs. 80,000, then the insurance company is liable to pay the corresponding amount.
In short, the IDV is the highest amount an insurer will offer if your bike is stolen or is a complete write-off.
Why is IDV in Bike Insurance Important?
Here is why IDV in bike insurance is of utmost importance:
- As IDV is the same as the current market value of your bike, the value helps in determining the maximum sum paid by the insurance company in case the two-wheeler gets stolen or is damaged beyond repair.
- The IDV has a direct impact on the policy premiums. This implies if the insured declared value of your two-wheeler is higher, the insurance company will charge a higher premium amount.
- The IDV proves beneficial in determining the claim settlement amount.
- Striking a perfect balance between proper coverage and economical premiums, the IDV in bike insurance ensures a fair deal between the insurer and the policyholder.
What is the Significance of Selecting the Right IDV in Bike Insurance?
Selecting a proper IDV for the bike insurance policy is very important. It affects your premiums and the claims you obtain whenever an unforeseen event occurs. Hence, choosing the right IDV is imperative. Here are some points that you must remember:
- Impact on Premiums:
The IDV sits at the heart of the vehicle insurance pricing model, and your insurance premiums will reflect this equation. Higher IDV has a higher premium because the insurer exposes itself to higher liability in a claim.
On the other hand, a lower IDV means that you will be paying a low premium, but you may be offered reduced financial coverage. So, you need to strike a balance so that you have protection without spending much money.
- Claim Amounts:
You must select a low IDV to recover adequate money during the claim. This means losing money at a time when you badly require it. On the other hand, if the IDV is high, the cost of premiums to be paid will be higher than necessary.
Therefore, you should select an IDV that will provide a value that keeps up with the market price of the bike but ensures you do not overvalue the bike.
- Avoiding Underinsurance and Over Insurance:
Getting the right IDV can save you from being underinsured or, on the other hand, over-insuring your assets. Underinsuring the vehicle means low coverage during the claim, while overinsuring means paying a higher premium.
The right IDV ensures your financial interests are safe without paying an unnecessarily high premium amount.
How to Choose the Right IDV in Bike Insurance?
Abide by these tips to pick the right IDV in bike insurance:
Know How IDV is Calculated:
It is helpful to know how IDV is evaluated to make better decisions. Insurance companies consider several factors when determining the IDV of your bike:
- Age of the Bike
New bikes have higher IDVs because of market value than older bikes.
- Depreciation
Depreciation kicks in with time and lowers the motorcycle’s market value, which is considered when deciding the IDV.
- Market Value:
The current market value of your bike is also used to arrive at the IDV. If you want a specific idea of your bike’s value, try using a bike value calculator.
- Avoid Too Low or High IDV:
The primary downside of choosing a very low IDV is that claim amounts in case of theft or damages are also lower. However, for a high IDV, you have to pay a huge premium.
Ideally, it should be enough to cover your bike’s value, but not more than that and not too little.
- Factor in Depreciation:
The IDV is highly sensitive to changes in depreciation. Over time, any bike becomes devalued, and therefore, your insurance coverage will be affected.
Therefore, it is wise to keep updating your bike’s value and IDV. This proactive approach helps avoid substantial premium rises in the future.
- Use a Bike Value Calculator:
A bike value calculator can be very useful in estimating the correct IDV for any assessment.
These calculators consider your bicycle’s make, model, age, and condition. By utilising these items, you can obtain a much better estimation of its market value today.
Factors Impacting the IDV Calculation in Bike Insurance:
There are also other factors that you need to consider when choosing IDV:
- Condition of the Bike:
A well-maintained bike will usually have a high IDV. Maintenance of your bike to competitive standards increases its value in the market. While computing your IDV, it is always important to consider the present state of your bike.
- Model and Make:
Some brands and models can retain their value longer than others. Bikes with upgraded performance tend to have a higher IDV than standard bikes. You can ask for a bike appraisal or examine your bike model to see how its market value changes with time.
- Location:
Your location can also increase or decrease the IDV. Bikes used in urban environments can be priced differently than those used in rural settings. Demand, theft rates, and insurance laws impact the IDV to be set. Considering these regional differences when establishing your specific bike’s value will be essential.
- Additional Accessories
Any additional accessories the manufacturer does not fit will increase the IDV. It will be calculated through this formula:
(Manufacturer’s Selling Price – Depreciation Cost) + (Accessories Cost – Depreciation of These Accessories)
- Insurance Policy Term
The insurance policy term will directly impact the IDV. When you increase the policy term, the total payable amount will increase, but the yearly payable amount will decrease, and vice versa.
How Does Engine Capacity Affect Premiums?
The engine capacity of a motorcycle is directly associated with its IDV. A motorcycle’s engine displacement, measured in cubic centimetres (cc), indicates the amount of space available inside the engine for fuel-air combustion, directly influencing the bike’s speed and power. As a result, the market price and the risk associated with such motorcycles also increase considerably, increasing the motorcycle’s total IDV.
Here is how a higher engine capacity of a motorcycle affects its IDV –
- Powerful engines allow bikes to reach high speeds, increasing the likelihood of accidents or damage. To cover this elevated risk, insurers charge higher premiums.
- High-CC bikes are built with advanced engineering and intricate mechanisms, making their maintenance and spare parts more expensive. This added cost is reflected in the insurance premium.
- Also, due to the high-end components of these motorcycles, their repair costs are significantly higher. The insurance providers consider this while calculating the IDV.
- Newer bikes with large CC engines come with advanced technology and a higher market price, making them costlier to repair or replace. This further increases the insurance premium.
The choice of IDV in bike insurance needs great attention. They adjust your premium costs and the maximum amounts you can receive during an insurance claim. So, do not look for an IDV that is either too high or too low, as it always has a monetary implication.
It is always wise to check your bike’s market value often and use a bike value calculator for the right information. Keeping these facts in mind will help you ensure the right coverage for bike insurance.