Finance

IDV & Other Important Terms in Two-Wheeler Insurance

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Motor vehicle insurance is bought to cover vehicles against damages sustained during accidents. Through insurance, the owner of a vehicle is assured of compensation in the case of damages caused due to accidents or other natural calamities.

There are varied differences between insurance covers depending on a variety of factors. However, one type, called two wheeler insurance third party cover, is mandated by the Government of India. The second is called a comprehensive insurance cover, which provides extended coverage.

Comprehensive covers are always preferred due to the higher protection they offer as compared to third-party coverage, which promises cover only to the third-party involved in an accident.

Besides, these insurance covers protect you against partial and total damages both. A ‘total loss’ is an event where irreparable damage is caused to the vehicle; theft is also covered under this. In this case, the insured declared value, known as IDV, is invoked to determine the amount the policyholder is paid.

Depreciation is the process through which an asset’s value drops over time. There is a standard method of calculating the depreciation of a vehicle depending on the amount of time that the bike has been in use. To calculate the IDV, the depreciation value is first calculated and then deducted from the manufacturer’s selling price to arrive at the amount that should be paid to the policyholder.

In simple words, the IDV of a two-wheeler is inversely proportional to its age, i.e. if the age of the vehicle is more, its IDV will be less.

It is also important to understand the following terms to understand two-wheeler insurance.

No-Claim Bonus: This is a concession offered on the premium amount during two wheeler insurance renewal. You receive this if you’ve not made a single claim in the previous policy term.

Zero Depreciation cover: This is offered as an add-on cover on a comprehensive insurance plan to exclude depreciation while calculating the total amount to be paid in case of partial or total damage of the covered vehicle. You will have to pay a little extra premium to purchase this add-on but will receive the total amount without depreciation.

Third-party cover: A third-party liability cover offers you financial protection against any damages caused to the third-party’s person or property; legal liabilities are also covered.

Own damage: Damages caused to your vehicle due to accidents or natural calamities such as floods, earthquake, etc. will be covered.

Personal Accident cover: This is a special insurance cover that protects the policyholder from any injuries or death from accidents. The Indian Motor Tariff, 2002, mandates vehicle owners to purchase this akin to the third-party liability cover.

An online insurance premium calculator can help calculate the total amount needed to purchase a two wheeler insurance cover and it is easily available online. Go use it to get insurance quotes within minutes.

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