The Concept of Insured Declared Value in Car Insurance
Car insurance has become mandatory according to Indian laws and regulations. The best automobile insurance should have some third-party liability insurance coverage. However, buying the right car insurance policy is tricky. You have to understand the terms relevant to this vehicle insurance. One of the most important concepts for car insurance buyers is the Insured Declared Value.
Brief detail about IDV-
Insured Declared Value is significant in the field of car insurance. It refers to the maximum amount that your insurance agency will pay you when you claim the loss. Thus, the amount you will receive for the damaged and stolen car is equal to the vehicle�s IDV. To know the IDV, you have to deduct the depreciation from the present market value of your car. However, you must not include the vehicle registration cost and insurance premium. If the car accessories are not factory-fitted, their IDVs need separate calculations.
Guide to calculating IDV-
Every car depreciates gradually with time. Your regular usage can cause natural wear and tear. Moreover, your car�s age is another factor making a difference in the depreciation value. From the day you drive your car out of the showroom, it undergoes depreciation. The value of a day-old car is depreciated by 5%. When the age of your vehicle is more than 4 years and less than 5 years, there will be a 50% depreciation. However, while the car�s age is more than 5 years, you will need to calculate the percentage based on your agreement with the insurance agency. Online IDV calculators are making your calculation easy. You need to know the vehicle�s selling price set by the manufacturer, and then, you can deduct the depreciated value from it.
While calculating your vehicle�s IDV, you need to focus on the relevant aspects, including-
- Manufacturer and model of the vehicle
- Details of vehicle registration (the location of your registration)
- Car registration date
- Private cars versus corporate cars
- Cubic capacity of the vehicle.
Vehicle Insurance Premium and IDV-
Your vehicle�s IDV will be proportional to the amount you pay. With your car�s age, the premium will decrease. The car�s value is different every year due to the depreciation factor. While renewing the auto insurance, you have to ask for a quote from the insurer. As car insurance is directly related to the insurance premium, some of us think of reducing the IDV. But, you must try to select the right IDV because it can affect the insurance premium and insurance claim amount. By lowering the IDV below the right market value, you insure your vehicle for an amount less than its worth. Thus, in case of car damages and theft cases, you will receive a low IDV. For instance, when your car�s IDV is Rs 4 Lakhs, the insurance provided will compensate a claim of Rs 4 Lakhs. However, in case, you have reduced the IDV to Rs 3 Lakhs, the insurance agency will compensate this amount. You have now understood the concept of IDV. Buy the car insurance policy and calculate the IDV.