IDV is an important part of your car insurance and not many people know about it. It’s essential to be aware of your insured declared value. Let’s take a look at why IDV is important when it comes to your car insurance.
What is IDV?
IDV stands for Insured Declared Value. It is one of the most important factors that is taken into account when calculating premiums. The Insured Declared Value is the maximum sum assured that the insurance policy will cover in case of a claim of theft or total loss. This is simply the amount you will be reimbursed in the event that you incur a complete loss on your vehicle. The IDV is determined by the present worth of your car as per the market rates. IDV is calculated taking into account the present value as given by the manufacturer minus the depreciation of the vehicle based on its age.
Why you should know your Insured Declared Value?
IDV comes into play only when you opt for own damage or comprehensive cover. Knowing your IDV is important for the simple fact that it is the main factor in determining the cost of your premium. The higher the IDV, the higher your premium. The premium is usually 2% to 3% of the IDV.
Higher or Lower IDV?
Some car owners opt to declare a lower IDV than the market value, but while this may lower your premiums, it will also mean that when you make a claim, the compensation amount will be much lower.
On the other hand, others prefer to declare a higher IDV, pay the higher premium on the assumption that the claim amount will be increased when an incident occurs. They also are under the notion that when they choose to sell their vehicle, they could quote a higher price than the market value. But this is not always a favourable situation to be in as the IDV is agreed upon by the insurance company and the insured.
The best option is to settle on an IDV that is closest to the actual market value of your car. As the car ages, the IDV will reduce.
The IDV is determined based on the manufacturer’s listed selling price of your car. The IDV will be calculated at the time of purchasing the insurance scheme or while renewing the policy after taking into account the depreciation. The IDV will include accessories fitted to the motor.
For vehicles that are 5 years and above, the IDV is usually based on a mutual agreement between the insurance company and the insured. The IDV will take into account the condition of the vehicle, availability of spares, and the make and model of the car. Given below is the depreciation schedule of the Insured Declared Value:
|Age of the car||Depreciation|
|Up to 6 months||5%|
|6 months to less than a year||15%|
|1 year to 2 years||20%|
|2 years to 3 years||30%|
|3 years to 4 years||40%|
|4 years to 5 years||50%|
IDV for Policy Renewals
When the time comes to renew your policy, you need not necessarily agree to the insurer’s charges. You can recheck your IDV and estimate if your premium is on par. You have the right to negotiate terms with your insurer to ensure you receive the right coverage for the right premium.
GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017