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Two Wheeler Insurance: Why It Is Important To Consider IDV At The Time Of Renewing Two Wheeler Insurance

Two Wheeler Insurance: Why It Is Important To Consider IDV At The Time Of Renewing Two Wheeler Insurance?

At times it becomes very difficult for  a layman to understand the various jargons involved in various documents which one come across while buying a financial product or a service. IDV or Insurance declared value is one such thing which one come across while renewing his/her two wheeler insurance plan. We should try and understand what this particular thing and what it wants to communicate. This is very important for two wheeler insurance policyholder to under because the same has lot of bearings on the premium that one pays for renewal and also the amount of claim that would be settled by the insurer at the time when it is raised. (Read more – Benefits of renewing two wheeler insurance)

Defining IDV or Insurance Declared value

Going by the definition it is the final value of money which the insurer think to settle as claim if the two wheeler is either stolen or the faces an accident which is beyond the scope of further repair at any given point of time. Every insurer tries to evaluate the risk associated with your two wheeler in terms insuring the same and this is done every time when the policyholder goes for policy renewal. This evaluation of risk is aimed at giving a price to the asset or the two wheeler. The primary calculation of value rotates around the rate at which the two wheeler depreciates due to regular wear and tear. One might even noticed that if one has missed a renewal, the insurer generally hire external values or surveyors to evaluate the two wheeler in physical state.

 

We we all know from the above explanation that depreciation is the core behind calculating the IDV and the calculation starts from the day the two wheeler is out from the showroom. We should keep in mind that the insurer would never consider the on-road cost for valuation which involves registration cost and taxes which are paid to the authorities. IDV is always calculated from the perspective of the market price offered by the manufacture which can be also called the maximum retail price of the two wheeler. From the perspective charging depreciation to the two wheeler’s value, the regulator has set certain standards for it and set bars on the maximum that can be charged as depreciation. The rates prescribed by the regulator largely depend on the age of the two wheeler.

 

Age of the two wheeler

 Percentage of Depreciation to be charged

Within 6 months

5%

More than 6 months but less than a year

15%

More than 1 year but less than two years

20%

More than 2 years but less than 3 years

30%

More than 3 years but less than 4 years

40%

More than 4 years but less than 5 years

50%

How two wheeler insurance premiums is based on the IDV?

As discussed above that the premium that you pay during renewal of your two wheeler policy has lot to do with insurance declared value of the vehicle but that is not the end of where calculations are finalized.It has a lot to do with physical state of the two wheeler and also to do with the claims that being raised in the previous policy years.In fact if the no claim being made in the policy in any of the previous year, the policyholder is always offered a discount in the premium in terms of no claim bonuses.

 

We should keep in mind that an higher IDV means higher premium but one should always know the exact value one is getting by paying the higher price.

 

Final thing that one needs to remember

One should very be various cautious in terms of understanding the IDV dynamics while renewing one’s two wheeler insurance plan.The IDV can also affect the price that you might get by selling it.One should always look at the stable IDv so that the claims get honoured by the insurer effectively and you don’t end up bearing everything out of your own pocket even if you have policy in place.

 

Insurers generally take the leverage of giving 5% to 10% above or below the original IDV to the policyholder so one should always press on the insurer to offer bit higher IDV so that one can take the benefits of right valuation of the two wheeler. if the the insurer denies to agree one can always compare two wheeler plans online and switch to a better insurer or a better plan.