When it comes to your bike insurance, the most commonly used term you hear is IDV. What is the importance of this IDV and what is it exactly? Declaring the right IDV is essential as it directly contributes to the determination of your premium rate and also dictates the maximum value that you can claim in case of theft or total damage.
What is IDV?
IDV is Insured Declared Value and is calculated based on the manufacturers listed sale price or ex-showroom price and the depreciation value of the bike. The age of the vehicle measures the rate of its depreciation and this is decreased from the ex-showroom price of the bike, in order to arrive at the final IDV. In simple words, IDV can be said as the estimated current market value of your bike.
This IDV is also the maximum sum insured amount that is fixed by the insurance company and provided to you, in case of theft or a total loss claim. If your bike suffers a complete loss due to accident, theft or natural disasters, IDV is the maximum compensation that will be offered to you by the insurance company.
The Importance of IDV in Premium Calculation
IDV is very crucial in determining the premium of your comprehensive insurance policy. Comprehensive insurance is broken down into own damage and third party liability sections. While the third party liability plan is determined by the category of the bike, the own damage cover’s premium is largely dependent on the IDV.
The premium of your bike is calculated by multiplying a certain fixed percentage off the IDV. The IDV of a brand new bike is higher since it has not much depreciation rate and therefore it directly translates into a higher premium rate.
On the other hand, if your bike is 2 years old, then its depreciation value is more and this leans to a relatively lower IDV. The lower the IDV, the lower your premium amount will be.
Declare the Right IDV
The premium rate escalates, if your IDV is higher. So, does that mean that when you buy insurance policy, you should declare a lower IDV?
No, insurance companies always take into account the depreciation rate of your bike in terms of its age. Declaring a lower IDV will not only lead to an erroneous premium, but will also decrease the maximum compensation returned to you, in case your bike suffers complete damage or if it is stolen. So, it is very important to settle on the optimal value and always declare the right IDV.
When you are comparing different quotes from insurance companies, always maintain a consistent IDV rate so that you can compare effectively and choose the right policy. Never try to declare a lower IDV to attract a lower premium. This can penalize you in the long-run and not necessarily yield you great savings.
To conclude, it is highly recommended to arrive at the right IDV that is close to the current market value of the car. So, keep in mind the above information before choosing the right insurance policy.