What Does Insured Declared Value (IDV) Mean In two-wheeler Insurance?

Your primary reason for purchasing two–wheeler insurance is to get a financial safety net if your two-wheeler is stolen or damaged beyond repair by an unfortunate accident. 

But to know what compensation is due to you if your two-wheeler is irreparably damaged or stolen, you need to understand an essential element in two-wheeler insurance cover simply known as Insured Declared Value or IDV for short.

What exactly is the IDV?

Simply put, the IDV in two-wheeler vehicle insurance is the total amount of money that an insurance company will be willing to pay the insured as compensation for a complete loss of their two-wheeler as a result of theft or irreversible damage. 

An insurance company determines the IDV based on two key factors. The first is the selling price of the two-wheeler as stated by the manufacturer, while the second involves adjusting the manufacturer’s price for the two-wheeler for depreciation incurred over time.

The general law in calculating the actual value of your two-wheeler is that the older your vehicle gets, the greater the depreciation percentage will be.

The table below explains the relationship between the age of a two-wheeler and depreciation. The depreciation percentage as per the age of a two-wheeler is deducted from the manufacturer’s selling price to calculate the IDV.

Relationship between premium payment and IDV

The relationship between your premium payment in continuance of a two wheeler insurance policy and the IDV is a straightforward one. The greater the IDV is, the more premium payments you will have to make to keep the policy alive. However, as your two-wheeler ages, the IDV will decrease, leading to a corresponding decrease in your expected premium payments. 

It is important to note that a clever trick applied by many insurance companies is to offer low premium rates on a two-wheeler insurance plan. It is done to lure would-be customers into buying two-wheelers as they think they can buy them at low monthly premiums. 

However, your payment of a low premium rate would mean that your vehicle is also insured at a low IDV. The consequence is that if you experience a complete loss of your two-wheeler to theft or an accident, you will not be able to get the true value of your two-wheeler in compensation.

What is two-wheeler third-party insurance cover?

There are situations where an owner of a two-wheeler gets into an accident with a third party.  If the owner of the two-wheeler is at fault for the accident, such a person could be liable for a lawsuit or pay restitution. 

However, with a two-wheeler third party insurance coverage, a policyholder is protected from legal and financial liability in an accident involving a third party. 

The insurance company will provide financial and legal protection after an accident until the policyholder makes regular premium payments.

Important two-wheeler insurance terms 

• Zero Depreciation Cover: This is an add-on cover that your insurance company can offer, but they will demand a greater premium payment in return. You can expect a much more extensive coverage to include partial losses with a zero-depreciation cover.

• No Claim Bonus: If you make no claims on your two-wheeler insurance cover after an entire year, your two-wheeler insurance provider can offer you a discount on your premium payment in the subsequent accounting year.

• Own Damage Premium: This is a premium payment made to cover your loss against damage caused by a force of nature or your own doing. This premium is paid for damages caused by floods, earthquakes, tornadoes, fires, etc. The insurance cover also protects your vehicle from self-inflicted accidents, such as impact damage.

• Personal Accident Cover: This insurance cover provides compensation to the policyholder in the event of injuries sustained during an accident with their insured two-wheeler. You are also insured against any disability resulting from the accident, with the insurance provider taking care of rehab, prosthetics, medication, and other forms of treatment due to a disability. You are also required to make extra premium payments for this add-on cover.

In conclusion 

The IDV of your two-wheeler policy is determined by the manufacturer value and the depreciation percentage on the age of your two-wheeler. Understanding IDV and the related terminologies lets you get the best benefit from your insurance policy. You should always ensure that the two-wheeler vehicle insurance policy you intend to buy does not overstate or understate your vehicle’s value at the point of purchase.