Third-party two-wheeler insurance is now valid for five years, whereas you must renew an own-damage policy annually. During renewals, several factors such as the add-on covers, No Claim Bonus (NCB), previous claims, and depreciation affect the premium. Moreover, the Insured Declared Value (IDV) also affects the premium, whether it is for a brand-new bike or during renewal. The IDV is the ex-showroom price of a bike minus the depreciation. When you take your bike out of the showroom, the depreciation sets immediately. So, the maximum IDV of a new bike is 95% of the ex-showroom price. Let’s know about the influence of IDV on renewal premium in detail:
While calculating the renewal premium of a bike, the insurers consider the effect of depreciation on the IDV. The following table gives an idea of the rate of depreciation.
So, with every passing year, the IDV decreases unless it becomes less than 50% of the sale price. After this mark, you must decide whether to retain or sell your two-wheeler.
Here’s the formula for calculating the IDV:
- IDV = (Company’s listed price – the depreciation value) + (Cost of vehicle accessories – the depreciation value of these parts).
The insurer calculates the IDV of the accessories added after you buy the car separately. You must pay extra if you want to bring them under the insurance cover.
In case the company installs the bike accessories, then the calculation of IDV would be:
- Insured Declared Value = Company’s listed price – the value of depreciation
The insurer does not consider the vehicle’s registration and other costs when calculating the IDV. This value is inversely proportional to the bike’s age. As the age increases, the IDV also decreases, affecting the premium payable at the time of renewal.
How does the IDV affect the renewal premium?
- Mutual terms between the insurer and the insured
The insurer cannot refuse renewal or third-party coverage if the policy is still open. If you declare a large IDV to get a higher claim, the insurer will inspect the bike and settle a lower amount based on the reports.
If the bike’s age exceeds five years, then the insurer calculates the IDV considering the parts’ conditions; whether they are serviceable or not. For old vehicles, the insurer and the bike owner must finalise the IDV by a mutual agreement. Some insurers may take the help of surveyors to calculate the correct IDV.
- Declaration of the correct IDV
During policy renewals, you must disclose the correct IDV as it directly impacts the two-wheeler insurance premium. The insurer settles the claim amount based on the IDV in case of damage beyond repair or bike theft. So, do not suppress the IDV for a lower premium. A low value may lower the renewal premium and your expenses, which may seem attractive. But, it also means a lower sum insured, and it is ultimately a loss for you. You will not receive the optimum value for your bike during a theft case or irreparable damage caused by an accident. Negotiate well with your insurer to get the desired IDV.
- A very high IDV
Note that if you calculate the market value or the IDV extremely high, then you may pay a much higher premium. So, fix the IDV well within your budget. It is even better to set the IDV closest to the bike’s market value.
- Correct calculation of the renewal premium
Check the renewal premium quote to find out whether the calculation based on the IDV is correct. You will get online calculators providing instant results once you enter the details.
- Policy terms
The maximum IDV limit will finally depend on the different insurance companies’ norms. So, the insurer’s decision is quite significant during renewal premium calculation.
Opt for online renewal as you will get the best deal in terms of discount. The process is also hassle free without any paperwork or involvement of agents. You can find attractive deals on several quote comparison websites, and they can guide you to choose the best available option. Compare different insurers during your bike insurance renewal to arrive at the best decision.
So, the IDV plays an important role to calculate the renewal premium. You must fix it in a way that it is closest to the bike’s market value. However, the IDV must not increase the renewal premium too high and rather be easy on your pocket.
