Two-wheeler insurance is mandatory by law for riding bikes on Indian roads. And your bike insurance premium is directly related to your motorcycles Insured Declared Value (IDV). Hence you need to understand what IDV is and how it affects your insurance premium.

What is Insured Declared Value (IDV) in Motor Insurance?

IDV is the monetary value assigned to your motorcycle when your bike insurance cover starts. Thus IDV is your insured vehicles current market value.

Your insurer considers the IDV as the total Sum Insured fixed at the time you buy your policy. Hence IDV is the highest compensation the insurer is liable to pay in case of theft or total loss (when the cost of repairs is more than 75% of the sum assured) of the vehicle.

In other words if your vehicle is stolen or suffers damage beyond repair you cannot claim an amount more than the IDV.

Also over the years as your vehicle ages IDV depreciates from the initial price. Thus the sum insured becomes lower every year.

How is IDV calculated?

IDV is based on the motorcycle manufacturers listed selling price for the make and model you purchased. The exact sum is calculated after deducting the depreciation amount from it.

IDV = Manufacturer's listed retail price Depreciation value

Thus the age of your vehicle affects its IDV. The monetary value of your bike becomes lower with the passage of years. Hence depreciation increases over time.

Before adjusting the IDV insurance companies consider the following factors:

• The bikes registration details
• The geographical area where the bike is registered
• The first purchase date i.e. its age
• The bikes ex-showroom price
• The bikes make and model and manufacturer
• The policy period

Did You Know: As per the Insurance Regulatory and Development Authority of India's regulations your bikes maximum IDV can be 95% of its ex-showroom price. This price is the vehicles actual cost including state tax. The registration and insurance costs are excluded from your two-wheelers IDV.

How does depreciation apply to your two-wheelers IDV?

Depreciation applies from the very first day you take your bike out of the showroom. It is the decline in the value of your bike when it leaves the store and you start using it.

The chart given below depicts the depreciation applicable as per the Indian Motor Tariff Act.

For example let's assume you buy a bike on 01.01.2020 for 500 excluding registration cost road tax insurance and accessories. After three years you purchase a three-year long-term package policy on 01.01.2023. Your insurer will cover it for following IDVs under the policy term from 01.01.2023 to 31.12.2026 as follows:

Period of Insurance

Mutual agreements between the insurer and the policyholder decide the IDV of bikes over five years old. The value depends on the bikes serviceable condition and the state of its body parts.

The same applies to models discontinued by manufacturers. The insurance company will send over a surveyor to check the condition of the two-wheeler and its components and the IDV is agreed upon based on the final report.

What is the impact of IDV on two-wheeler insurance premium?

The higher your two-wheelers IDV the higher will be your premium amount. Hence as your bike ages and its IDV falls the insurance premium also decreases.

However it is advisable not to go for a lower IDV at the beginning lured by lower premiums. Then in case of any damage or loss you cannot get a reimbursement matching your vehicles actual price. Hence it is better to buy two-wheeler insurance for an IDV closest to the price you paid for your bike.

Conclusion

Your bikes IDV decides the compensation you can get from your two-wheeler insurance. Quote your bikes actual cost to get the maximum possible reimbursement from your policy.