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Multiple factors need to be looked into when choosing a suitable insurance policy for your car, whether at the time of purchase or during subsequent renewals. One of those is IDV.
IDV, which stands for Insured Declared Value, is nothing but the current market value of your car. In case of theft or total damage to your car, IDV is the sum provided to you by the insurance provider. It is usually fixed/determined by the insurance provider. IDV is one of the major factors which decide the amount of premium you end up paying to cover your car.
The formula used to calculate IDV is given below:
IDV= (Manufacturer’s listed selling price- depreciation) + (Accessories not included in listed selling price - depreciation) excluding registration and insurance costs.
So, while calculating IDV for your car, insurance and registration costs are excluded. Any accessories that do not come as a standard fitting with your car are also excluded. This point should be noted to avoid any misunderstanding or disappointment when you raise a claim.
When you buy a new car the IDV is equal to 95% of the ex-showroom price provided by the manufacturer. This is because normally the depreciation of a new car is 5%, so when we deduct this from the ex-show room price, we get the above value, i.e. 95%. Over time, IDV is reduced owing to the age of the vehicle and other factors. So, the IDV of a four-year-old car is obviously less than a brand-new car. As we can see, the equation for calculating IDV includes a term ‘depreciation’. This is the reduction of the market value of your car over time.
While searching online or offline for car insurance renewal, you may come across widely varying quotations of premium. One of the reasons for this may be the lower IDV being offered by the insurance providers. As stated earlier, IDV plays a part in deciding the final premium you pay for the cover. If you choose to go with an offer which quotes lesser IDV for your vehicle, you end up paying a lesser premium amount. But the real problem arises when you raise a claim for total damage or loss of your car. It is certain that you will be disappointed as you end up getting a much lesser amount as compensation by the insurance provider as the IDV agreed to was lower than the actual value of the vehicle. So, it is advisable to keep the IDV as high as is practically possible and admissible, to avoid any future losses and disappointment. As it is your hard-earned money that has bought you the car and its insurance, it is imperative to ensure that every rupee spent returns complete value.
It is also not advisable to claim a higher IDV than is rationally accepted, hoping to be compensated heavily in case of theft or total loss of the vehicle. The insurance provider will invariably investigate all such claims, and the disproportionate declaration of IDV will come to light and land you in trouble. If you and the insurer have agreed beforehand on the IDV, then the insurer would not have any reason to deny a claim when it arises, given that the claim is in order.
In the case of a car being stolen, or the expense of restoring the damaged car is more than 75% of the IDV, then the settlement on that case might be equal to the IDV.
So, summing up, it is in your own interest to scrutinise the IDV value while buying a new insurance policy for your car or while renewing it, so that you get the best value for the premium you pay and rest assured about compensation in case of theft or total loss of your car.
At Liberty General Insurance, you can avail a car insurance. For more details about the policy available.
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