The Motor Vehicles Act, 1988 makes it compulsory for all bike owners in India to insure their two-wheeler before riding it on the road. Since insurance of bike is usually of one year, it becomes necessary to renew it before the expiry date. To make things easy for policyholders, long-term bike insurance has also been introduced by the Insurance Regulatory and Development Authority of India (IRDAI). This way, you can insure your bike for three years. Whether you choose a one-year insurance of bike or a 3-year two-wheeler insurance online, it is important to get your bike’s Insured Declared Value (IDV) right.
Understanding Insured Declared Value
There are a lot of myths associated with Insured Declared Value. Simply put, it is the value stated by the insured person. The following points will help you to understand the term so that you are in a better position while renewing insurance of two-wheeler.
● Insured Declared value is commonly referred to as the bike’s approximate current market price
● Note that Insured Declared Value in no way refers to the selling price of the bike
● Insured Declared Value is the highest amount one can receive from an insurance company in case of a claim settlement
● In case the insured bike is stolen or faces total loss, you shall receive an amount that is equivalent to the bike’s pre-decided Insured Declared Value
Calculating Insured Declared Value for Two-wheeler Insurance online
The calculation of a bike’s Insured Declared Value is based on a formula and a depreciation table. The formula is as follows:
Insured Declared Value = (Listing price stated by the bike manufacturer – Depreciation of the bike) + (Additional accessories in the bike – Depreciation of accessories)
Mentioned below is the depreciation table as per India Motor Tariff:
|Age of the vehicle||% of Depreciation for calculating IDV|
|Not exceeding 6 months||5%|
|Exceeding 6 months but not exceeding 1 year||15%|
|Exceeding 1 year but not exceeding 2 years||20%|
|Exceeding 2 years but not exceeding 3 years||30%|
|Exceeding 3 years but not exceeding 4 years||40%|
|Exceeding 4 years but not exceeding 5 years||50%|
|Exceeding 5 years||Depends on mutual understanding between insured person and insurer|
While Renewing Insurance of Two-wheeler
The insurance company shares with you an IDV based on the above-mentioned table while renewing insurance of two-wheeler. More often than not, you are also provided with a range in which you can change this IDV during purchasing or bike insurance online renewal.
Make sure to crosscheck the IDV of your bike while renewing its insurance. Do not fall for discounts that have been offered after reducing the IDV.
What is the Ideal Insured Declared Value (IDV)?
Going for a lesser IDV will reduce your premium amount but will also result in a lower amount during claim settlement. Increasing the IDV will mean you have to pay higher premium in exchange for a comparatively higher amount during claim settlement which you may not even apply for. Applying for a claim has a direct bearing on your No Claim Bonus, thus people refrain from raising a claim for smaller amounts.
Remember, insurance is not designed for making profit. There is no way you can legally make profit by raising a claim. Raising a claim for making profit might have legal consequences as it falls under insurance fraud. Comprehensive Bike Insurance policies are created to lend support to the policyholder during difficult situations such as accident, calamities, or theft. Therefore, it is best to not think too much about changing the IDV and stick to the formula and the table to arrive at your bike’s ideal IDV.