The existing market value of your car at a particular point of time is referred to as the Insured Declared Value (IDV) of the vehicle. In the event of a total loss or theft, it is the maximum sum insured amount that your insurer is willing to reimburse you with. IDV depends upon the current listed selling price of the manufacturer that is calculated based on the model and age of the vehicle.
When your vehicle is brand new, your IDV is the highest. As time passes by, your vehicle gets worn out and reduces in value which is why your IDV lowers with passing time and increasing depreciation. When your car insurance is up for renewal, it is important to set your IDV appropriately.
IDV and Premiums on Car Insurance
Your vehicle’s IDV is calculated by a standard deprecation table which is as per Indian Motor Tariff. It is essential to check your IDV when renewing car insurance. After all, there is a close connection between your car insurance premium and IDV. Remember, the higher the IDV, the higher is the premium that needs to be paid.
The premium lowers if the IDV is reduced. Check the IDV of your car and see whether it justifies the premium you pay or not. If you are not satisfied with the result, you can either negotiate or change your insurer. Ensuring you set the IDV correctly on insurance renewal helps you obtain the right kind of coverage, at the best cost.
Differences in IDV
After understanding the IDV based on the depreciation table, you obtain a rate and the IDV gets fixed. You as a policyholder can still alter it slightly if you wish to. If you do not set the correct IDV at the time of insurance renewal and mishap occurs, you won’t be able to claim the entire IDV amount. The amount you claim will then greatly vary on the type of claim and to what extent the vehicle is damaged.
There won’t be a problem in claim settlement if the policyholder and the insurer mutually agree on a higher IDV. If the system catches this however, owing to a technical glitch, it can lead to problems. Investigations will then try to come to a conclusion whether the IDV was revealed appropriately and not done with an intention of fraud. It is best to keep the IDV within a sensible range.
For a five-year or older car, the insurer and policyholder both come to a mutual decision and fix the value. The insurer cannot reject a renewal if it is a running policy, but zero depreciation and other types of add-ons may not be provided.
Renew With the Right IDV
You need to renew car insurance based on the company that provides you with the most optimum IDV at the most appropriate premium cost. Although it may seem beneficial to get the car insured for a lower IDV as it also lowers the premium, it is not advisable as you do not protect the real value of your vehicle and can unknowingly put it at risk. Renewing on a full IDV ensures the insurer pays up the correct amount, should your car get stolen or damaged.