Your bike is a thing of pride for you especially when it is bought from your hard earned money. While third party insurance is the minimum coverage you need to have as required by Motor Vehicles Act, however, a comprehensive coverage will not only help you compensate for the third party damages but will also help in survival against the damages done to your own vehicle.
A comprehensive insurance policy comprises two aspects i.e. own damage (OD) and third-party. OD covers loss or damage to vehicle against accidental damage, natural calamities and man-made calamities whereas third-party cover protects the insured against liability due to accidental damages resulting in the serious or permanent injury or death of a person, and damage caused to the surrounding property. But the question arises how does the insurance company judge the value of your bike? For calculation of premium, insurance company uses “Insured Declared Value” (IDV) whereas third party premium is calculated as per the vehicle category and has no relation to the IDV of the vehicle.
With the ever escalating inflation rates, premiums are bound to increase. But there are several ways that will help you to curb your two wheeler insurance premium. For example buy anti-theft devices and avail a premium discount. Besides if you ensure that your ride is safe without meeting any accident throughout the year you’re eligible for no claim bonus benefits in the form of additional coverage or discount in premium rates. However, at times, some customers tend to adopt not so favourable means. One of these is declaring or unknowingly accepting a lower IDV of the vehicle. An IDV value is the main part to decide the insurance premium of your vehicle, be it a sedan or your two-wheeler.
The article will help you understand the concept of IDV while purchasing your two wheeler insurance. IDV is considered as the sum insured and is fixed at the commencement of each policy period for each insured vehicle. IDV is arrived on the basis of the manufacturer’s listed selling price of the brand and model, and then adjusted with the standard deprecation rates as per Indian Motor Tariff. It is the maximum amount that an insurance company will pay in case of a claim, i.e. in the event of total loss, constructive total loss and/or repair of the vehicle is greater than 75% of IDV or your vehicle being stolen. Understand that the rate of depreciation keeps increasing with the age of the car. A new car can fetch the maximum IDV but as the vehicle turns old, the rate of depreciation keeps increasing. The rate of depreciation is calculated based on a standard metric (on the basis of age of the vehicle). If the bike is more than 4 years old, or is an obsolete model (i.e., a model not manufactured anymore), the insurer and the insured have to come to an understanding on it.
At the time of first purchase of your two wheeler insurance as well policy renewal, current selling price of the brand and model is considered for computation of IDV and not the price at the time of purchase of the vehicle. Experts say that if one declares a lower IDV than the reasonable market value and were to make a claim for total loss, one will receive a lower claim amount since the IDV declared was lower. Thus, a little saving on the premium by declaring a lower IDV can result in much higher loss during unfortunate event of a large claim or theft of the vehicle.Similarly some customers tend to declare a high IDV under the assumption the claim amount will increase or it can help them gain extra bucks if they were to sell the vehicle in the market. However, this is not the case. At the time of claim processing, the insurer will consider the age of the vehicle and hence its depreciation before finalizing the claim. Therefore, indirectly one will end up getting low claim inspite of high IDV. So, the next time you renew your two wheeler insurance, make sure that the IDV declared is in sync with the vehicle age and model.