Insurance is a pretty known concept today. Everybody knows what it is and what it does. Moreover, most people have insurance of some kind. However, most people think of insurance as a safety net only to be used in a bad situation. While it is true, it keeps them from knowing so much more that insurance can do. The best example of this are No Claim Bonus and IDV. Even if people have heard the terms, many of them have no idea what they are and how they can be beneficial.
Now the biggest question you may have is why you need to know about all of this. You’ve bought a bike insurance policy and if any accident or mishap ever happens, you are covered for damages. However, factors like IDV and NCB can affect your policy itself. To know how, you need to know what they are. Here’s a brief explanation:
What is IDV?
IDV or insured declared value is a vital part of two-wheeler insurance. Sometimes, in the case of an accident, your bike can take so much damage that it breaks beyond fixing. Or, you bike might get stolen with no sign of being found.Either way, getting money for repairs in this situation does not make sense. For such a scenario, the insurance provider will pay you a fixed amount set as the vehicle’s insured declared value. It is essentially a compensation for the loss of your vehicle.
For example, if an insurance provider sets your bike’s IDV at INR 40,000, they will pay you the amount and also when your vehicle is stolen or destroyed beyond repairs.
As a vehicle is an asset, its value depreciates over time. Hence, since the day you buy your bike, its market value decreases. The IDV of your vehicle depends on your bike’s market value at the time you buy the policy. Furthermore, the IDV affects the insurance premium you have to pay. Hence, you should pay special attention to the IDV offered by your insurer when you buy a policy.
How you can calculate IDV
While the IDV is decided by the insurance provider, you can use this formula to get an idea of how much it could be:
IDV = (Bike’s initial price – current depreciation value) + (Price of accessories in vehicle – depreciation value of accessories)
With this formula, you can approach your insurance provider with how much IDV you should be getting. You can also use an online IDV calculator for the same. Most insurance providers offer it on their website. All you have to do is open the calculator and enter the information required. Within a few clicks, you will know your potential IDV.
No-Claim Bonus (NCB)
Remember when you were little? Your father would tell you to do some chore for him and give you a candy after you’ve done it. That is essentially what NCB is. Known as No Claim Bonus (NCB), is a rewardthat insurance providers grant you for not making claims. Usually, this benefit is offered to policyholders that have gone without making claims for the entire term of the policy. Since most policy require renewals each year, NCB becomes an annual benefit. However, a No Claim Bonus benefit is only offered as an add-on for comprehensive policies. Hence, buying or not buying an NCB cover can affect your premium.
NCB benefit is transferrable. This means it can be transferred to another insurance provider if you ever decide to switch. Moreover, it can also be transferred from an older vehicle to newer vehicle. NCB is calculated on the basis of percentages. This benefit is a usually 20% after you go one year without a claim. It keeps increasing every year until hits 50%.