Insurer Declared Value: Understanding the Significance of IDV in Bike Insurance
The Insurer Declared Value (IDV), also known as the Insured’s Declared Value, is a crucial term in bike insurance. It may seem complicated at first, but it is actually a simple concept. IDV refers to the present market value of your motorcycle and can be defined as the maximum compensation you would receive if your vehicle is deemed a total loss.
How is the IDV of your bike calculated? If your two-wheeler is less than 5 years old, the IDV is determined based on its age and the applicable rate of inflation specified by the Motor Tariff Act. For example, if your motorcycle is less than 6 months old, a 5% depreciation is applied. This means that the IDV of your bike is 95% of its ex-showroom price. As your vehicle ages, the IDV decreases. If your bike is between 4 and 5 years old, the applicable depreciation is 50%. This implies that after just 4 years, the value of your vehicle will be half of its ex-showroom cost! Once the vehicle exceeds five years of age, the IDV is mutually agreed upon between the insurer and the bike owner (policyholder).
Can you set the IDV of your own bike insurance plan? Absolutely! You have the freedom to set the IDV of your plan according to your preference. The insurance company will provide an estimate based on the age, depreciation, and condition of your bike, but you have the option to accept their valuation or adjust the IDV as per your needs.
Let’s explore the advantages and considerations of increasing the IDV. Increasing the IDV results in higher compensation in the event of a claim. This means that if you increase the IDV of your plan, you will receive a larger payout if your bike is stolen or damaged beyond repair. This can help alleviate the financial impact of such unfortunate incidents and make it easier for you to purchase a new bike. However, it is important to note that increasing the IDV also leads to higher premiums. This is because a higher IDV poses a greater risk to the insurance provider. Therefore, to obtain coverage with a higher IDV, you will have to pay a more expensive premium.
Checking the IDV of your vehicle is simple. You can use a two-wheeler insurance premium calculator, which is available online. These calculators not only provide you with the cost of your plan but also indicate the IDV of your vehicle. You can adjust the IDV and the calculator will update the premium accordingly. This empowers you to choose the right IDV based on your coverage requirements and financial needs.
Now, you may be wondering when the IDV of your two-wheeler becomes payable. There are several scenarios in which the IDV is provided as compensation:
1. Theft: If your bike is stolen, the IDV of your motor insurance policy becomes payable as reimbursement for your losses.
2. Total Loss: If your bike is damaged beyond repair, rendering it a total loss, the IDV of the plan is provided as compensation.
3. Constructive Loss: In this scenario, the repair costs exceed 75% of your bike’s IDV, making it impractical to cover the repairs. Instead, the insurance company provides you with the IDV of your bike.
It is worth noting that total and constructive losses are often the result of accidents, but they can also occur due to natural disasters. Having a higher IDV will always be beneficial in such cases. However, it is important to remember that these occurrences are relatively rare and do not happen frequently. Nevertheless, you should not decrease the IDV assuming that it will never come into play. Your bike is exposed to risks both on and off the road, and in the unfortunate event of severe damage, a lower IDV will only add to your disappointment. It is best to strike a balance between an ideal coverage and affordability.
In conclusion, now that you understand the significance of IDV, you can make an informed decision when purchasing your bike insurance policy. Set an IDV that suits both you and your bike. Avoid setting an IDV that is too low or too high because its purpose is to compensate for the financial loss of your vehicle. IDV should not be used to save money or demand excessive compensation. Lastly, always prioritize safety by wearing your helmet whenever you ride your bike. Ride safe and good luck!
Source: Mid-Day News
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