What is Insured Declared Value (IDV)? How IDV is Calculated?
Car insurance can be tricky business.That is why you must read your policy documents carefully.Besides, there may be certain terms that you are unaware of.
Imagine this scenario...
You have heard of IDV, but do you really understand IDV?
Take the case of Saman Ali, a 25-year-old human resources manager. Her car had not yet had a breakdown or been in an accident. In June this year,she bought a car insurance policy with an own damage clause. She did so at a lower insured declared value (IDV). A week later, Saman’s sedan suffered serious damage in an accident. But the insurer’s claim disbursement did not meet Saman’s expectations. It was all because of the low IDV.
What is Insured Declared Value (IDV)?
The term ‘IDV’ refers to the maximum claim your insurer will pay if your vehicle is damaged beyond repair or is stolen. Suppose the market value of your car is Rs 8 lakh when you buy the policy. That means the insurer will disburse a maximum amount of Rs 8 lakh.
Did You Know: Your IDV keeps falling!
Now,the value of your car begins depreciating from the minute of its purchase. If the IDV is low, then the car premium will also be low.
Could you inflate your IDV? You could, but the insurer will recognise this ploy.The insurer will factor in the age of the car andits value in the current market. These factors will finally decide the claim amount. Unfortunately, you may end up paying a higher premium and incur losses. But a lower IDV that is less than the reasonable market price may pose a problem too. This is because you will receive a lower claim amount.
Now, your insurance premium is directly proportional to the IDV of your car. As your car becomes older, the premium will reduce.
The calculation of the IDV depends on the following aspects:
- Manufacturer, make, and model of the car.
- Details of car registration, including the city ofregistration.
- Date of registration of your car.
- Whether it is a private car or one owned by a company.
- Cubic capacity and ex-showroom price of the vehicle.