Most car owners in India know that as mandated by law and under the Motor Vehicles Act of 1988, every vehicle on Indian roads has to be insured for a third party liability insurance cover. Hence, each individual who purchases a car from a dealership is advised to also buy a car insurance policy along with it. Having said that, it is highly recommended that you buy a comprehensive car insurance policy as opposed to only third party liability cover as it protects against both, damages caused to the third party as well as to yourself.
Your four wheeler insurance plan is an important document. It helps you when you need coverage in the event of an unfortunate road mishap. Therefore, it is advisable that you thoroughly understand the terms and conditions listed in your plan. One of the major deciding factors when purchasing a car insurance policy is the premium amount that is to be paid. The approximate value of your premium payable is provided in your car insurance quote and an important factor in determining the same is the IDV or Insured Declared Value.
Let’s explore what IDV is and why is it important.
What is IDV?
There are various factors that go into determining your car insurance premium. One such factor is the insured declared value or the IDV of your car. In simpler terms, IDV implies the current market value of your car. Let’s take an example, if you buy a car today for Rs. 10 Lakhs, its value after 3 years will certainly be less than this amount as a car is a depreciating asset. Once you start using your vehicle, its monetary value gradually decreases on account of regular use. Therefore, 3 years after you have bought a car, its value will probably be around Rs. 5-6 Lakhs. This amount (the current market value) is called the IDV of the car. In insurance terms, insured declared value is the maximum Sum Assured fixed by the insurer which is provided to the insured on theft or damage/loss of the vehicle.
How is IDV calculated?
An insurance company uses standard available data to ascertain a car’s insured declared value. Following parameters are taken into account when your car’s IDV is calculated:
- Age of the Vehicle: After you have purchased a car, in the first year of use, insurance coverage is typically provided at 90% to 95% of the car’s ex-showroom price. Whereas, in its fifth year of use, insurance coverage is usually provided at 50% of the car’s original ex-showroom price.
- Manufacturer Make and Model of the Vehicle: The size, shape and cubic capacity of your car are also considered when determining its current market value. A bigger car usually requires a larger premium amount.
- Vehicle and City Registration Details: Your car registration details are available on your registration certificate. Also, the city where your car is registered has an impact on its insured declared value. The IDV of your car in a metro city may be less than its IDV in a tier-II city.
Why is it important?
While calculating car insurance premium, the IDV of a vehicle usually falls within a certain range considered by your insurer based on the vehicle’s ex-showroom price. Therefore, not knowing the IDV of your car may result in you paying an incorrect premium amount. Also, in case of an unfortunate incident/damage/ theft, you might end up receiving a lesser amount than you should be due incorrect IDV. Hence, it’s important not to understate or overstate the IDV of your car. Doing this will hamper the insurance coverage (sum assured) that you need.
Now that you know what IDV means, go ahead and take a quick car insurance quote from Finserv Markets to buy one of the best car insurance policies available in the market.
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