The most important factor for any two-wheeler owner in a bike insurance policy is the Insured Declared Value (IDV). The IDV figure determines the maximum compensation that the insurance provider will pay in the event of theft, total loss, or irreparable damage. However, it is one of the most misunderstood and ignored aspects of bike insurance. If the IDV is kept too low, it will result in lower claim settlements. If it is kept too high, it will mean unnecessary premium expenditure.
The IDV of your bike is the maximum compensation that can be claimed in the event of:
Total loss of the vehicle
Theft of the vehicle
Repair Cost
The IDV is calculated by considering the following factors:
Manufacturer’s listed selling price (ex-showroom price of the bike)
Age of the vehicle
Depreciation applicable to the vehicle
Accessories fitted to the bike
The formula for calculating the IDV of the two-wheeler is as follows:
IDV = Manufacturer's Ex-Showroom Price - Depreciation based on the age of the vehicle. If the two-wheeler is factory-fitted with accessories and insured, the depreciated value is also added to the final IDV./p>
Locate the manufacturer's list price of the bike make and model to determine the ex-showroom price. The ex-showroom price refers to the price before registration, insurance, and taxes.
Determining the vehicle's age involves computing the period it has been owned, starting from its date of first registration.
To find the standard depreciation rate, use the standard depreciation table below and the appropriate percentage for the vehicle's age.
Accessories (if any): If accessories such as alloy wheels, GPS navigation, anti-theft devices, etc., are separately insured, their depreciated value is also added to the IDV.
The formula then is: IDV = (MRP of the bike - Depreciation Value) + (Price of the additionally fitted accessories - depreciation value of the additional accessories)
The last Insured Declared Value is obtained by deducting the depreciated value from the ex-showroom price.
Depreciation is the decrease in the bike's value over time. The standard depreciation rates used in the IDV Calculator in Two-Wheeler Insurance are:
| Age of Bike | Depreciation Rate |
|---|---|
| Up to 6 months | 5% |
| 6 months – 1 year | 15% |
| 1 – 2 years | 20% |
| 2 – 3 years | 30% |
| 3 – 4 years | 40% |
| 4 – 5 years | 50% |
For more details on depreciation rates and other official statements, please refer to the updates from IRDAI.
Quick Example:
Consider a bike with an ex-showroom price of ₹1,00,000 and 2 years of age
Depreciation rate for 2 years: 20%
Depreciation amount: ₹20,000
Calculated IDV: ₹80,000
| Bike Model | Approx. Ex-Showroom Price | Age | Estimated IDV |
|---|---|---|---|
| Hero Splendor Plus | ₹75,000 | 2 years | ₹60,000 |
| Honda Activa 6G | ₹80,000 | 3 years | ₹56,000 |
| Bajaj Pulsar 150 | ₹1,10,000 | 1 year | ₹93,500 |
| TVS Apache RTR 160 | ₹1,20,000 | 4 years | ₹72,000 |
| Royal Enfield Classic 350 | ₹2,00,000 | 2 years | ₹1,60,000 |
Disclaimer: The prices and IDV shown above are just rough estimates based on the depreciation norms. The actual IDV may differ depending on how the insurer prices it, the vehicle's location, and condition. The average range is (±10–15%).
Once the vehicle is 5 years old, it is not necessary to calculate its IDV using the standard depreciation rates. The IDV can be based on:
Current market value
Vehicle's physical condition
Insurer-policyholder negotiations
If the two-wheeler is discontinued, surveyors are appointed to evaluate the IDV of your vehicle, and the additional cost is borne by the policyholder.
There is a direct connection between IDV and insurance premiums:
The higher the IDV, the higher the premium
The lower the IDV, the lower the premium
Since IDV is the limit of the insurer's payout, a higher IDV implies higher risk for the insurer, and hence, it will be reflected in the premium.
The final premium is determined by other variables, such as:
The insurer's in-house pricing methodology
The geographical zone where the vehicle is registered
The engine's cubic capacity
The chosen add-on covers
The No Claim Bonus (NCB) accumulated over the years of the policy
Whether the vehicle is used for personal or commercial purposes
The best approach is to set the IDV as close as possible to the bike's current market value, so one gets the right coverage without paying unnecessarily high premiums.
High claim payout in case of total loss
More financial security
More premium cost
Low premium
Low claim settlement amount
More out-of-pocket costs in the event of total loss
| Parameter | IDV | Premium |
|---|---|---|
| Definition | the maximum amount of money that the insurer covers in case of complete loss or theft of the vehicle | Cost of insurance policy |
| Function | Determines claim payout | Determines policy cost |
| Basis | Depreciation and price | IDV, add-ons, location, insurer |
| Impact | Affects compensation | Affects affordability |
The IDV plays a central role in determining insurance coverage:
Establishes maximum claim liability
Ensures accurate compensation for theft or total loss
Helps maintain financial balance between premium and coverage
Prevents underinsurance or overinsurance
Selecting an incorrect IDV can result in:
Financial loss during claims
Rejection of the claim due to misrepresentation
Lower claim settlement than expected
Higher premium without proportional benefits
The IDV is the maximum amount an insurer will pay in most major claim scenarios. Understanding its role in different situations enables policyholders to make informed decisions when purchasing or renewing insurance.
In case of total damage, the insurer will not cover the cost of repairs; instead, the policyholder receives the full IDV amount after the excess or deductible is paid. As the vehicle is salvaged and beyond the point of repair, the insurer usually keeps the damaged vehicle.
In a theft claim, once the standard deductible and other conditions are met, the insurer pays the full IDV. Usually, the claim submission involves providing the FIR, the police's non-traceable certificate, and all original vehicle documents. After the claim is allowed, the IDV set at the time of policy issue is the final amount that is paid out.
When, technically, the vehicle can be repaired but, economically, the repairs are so expensive that it hardly makes sense, this situation is termed 'Constructive Total Loss' (CTL). Generally, when a repair cost of the vehicle is more than 70% of the IDV, the vehicle is considered under CTL and instead of repairing the vehicle, IDV is disbursed to the policyholder and the vehicle is typically kept with the insurer for salvaging.
Renewal is a bike insurance moment that's usually ignored but is really very important. During renewals, policyholders have the opportunity to change the IDV value and choose their desired insurance coverage.
Every year, the IDV is automatically reduced in line with the vehicle's depreciation. Insurance companies follow a regular depreciation schedule and give the yearly IDV when they send the renewal quote. When it comes to value, policyholders should check the figure thoroughly rather than just accepting the auto-renewed value, as an undervalued IDV at renewal poses the same threat as an incorrectly set IDV at inception.
The calculated IDV figure at renewal is not a fixed formula, though. Insurers have a right to give IDV within a certain range, usually a band around the vehicle's market value. If they think the auto-calculated IDV doesn't accurately reflect the current market value of their bike, especially if it's a well-maintained or low-mileage one, they can negotiate upward within this range.
Renewal is also a great time to conduct a reality check on IDVs and premiums across insurance companies. One insurer might give a higher IDV to a certain vehicle than another, working all this out based on their own data for pricing, lead times, resumes, and cited prices. In the end, choosing an insurer that offers a fair and accurate IDV rather than the lowest premium is a wiser long-term financial decision.
NCB doesn't have any impact on the value of the vehicle (IDV). Still, it can reduce the premium to be paid on the renewal policy. There are instances when the policyholder, after a claim, reduces their IDV to compensate for the NCB reduction; however, this is a wrong practice and increases their exposure to financial loss in the case of a future claim. Before renewing, policyholders should verify the following:
Is the IDV close to the bike's current resale or market value?
Has depreciation been applied correctly based on the vehicle's actual age?
Are any additional accessories or modifications reflected in the IDV?
Is there a better IDV offer available from an alternative insurer?
The IDV should be set close to the bike's current market value, taking into account age and depreciation. This ensures adequate coverage in the event of a total loss or theft without overpaying for premiums.
IDV is calculated by deducting depreciation from the manufacturer’s listed selling price of the bike. Additional accessories, if insured, may also be included in the calculation.
No, declaring an incorrect IDV does not give you an advantage, as it will either limit your claim payout or the insurer may not even honour your claim.
Yes, IDV will decrease year over year due to depreciation, which reflects a vehicle's declining market value.
Yes, the IDV can be increased within certain limits at the time of purchase or policy renewal. However, it will have to be valued at its approximate market value.
The IDV is determined using the insurer's standard depreciation rates and regulatory guidelines and represents the maximum amount of the insurer's liability under a full coverage policy.
An insurer can establish the mutually acceptable IDV and the policyholder within a range of values agreed to by both parties, such as the vehicle's fair market value.
The correct IDV can be determined using an IDV Calculator in Two-Wheeler Insurance, which takes into account the bike’s age, model, and depreciation.
