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.
| TWO WHEELER AGE | DEPRECIATION PERCENTAGE (%) PER AGE |
|---|---|
| 6 months or less | 10% |
| 6 months to 1 full year | 20% |
| 1 full year to 2 years | 30% |
| 2 full years to 3 years | 40% |
| 3 full years to 4 years | 50% |
| 4 full years to 5 years | 60% |
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.
