As a car owner, you are mandatorily required to purchase a car insurance policy. It comes as a legal requirement to comply with the Motor Vehicles Act which requires all registered vehicles in the country to have insurance coverage. While you invest a considerable amount in these insurance plan, it is advisable to make the most of it.
When buying a car insurance policy, there are two options to choose from, a third-party plan or a comprehensive one. Third-party plans, also known as liability-only covers, offer a limited scope in terms of coverage. Such policies provide legal compliance and basic coverage against legal liabilities arising due to an accident. On the contrary, a comprehensive plan provides coverage for own damages too. This way, you can ensure an all-round protection for your vehicle as well. But when selecting a plan, there are different terms that you might stumble upon. One such term is the IDV.
What is Insured Declared Value?
Insured Declared Value or IDV is the maximum amount assured in your insurance policy. The payment for such amount is made in the situation where the damage is beyond repair, also known as total loss or in the event of theft of your car. Since such amount is the risk that the insurance company has to undersign, it directly impacts the premium calculation.
How is IDV calculated?
IDV is calculated using a mathematical formula which is as follows –
Insured Declared Value or IDV = Manufacturer’s listed price (ex-showroom price) – Depreciation + Cost of accessories – Depreciation thereon.
* Standard T&C Apply
Can the IDV be changed?
Yes, insurance companies allow the IDV to be changed. However, such change is allowed within specified limits based on the terms of the insurance company. So, if you feel the IDV as decided by your insurance company is insufficient, you can increase it to higher amount subject to limits as per policy terms. Altering the IDV has a direct impact on the premium and hence, you need to be careful when tweaking it. * Standard T&C Apply
Does decreasing the IDV impact the insurance claim?
Yes, decreasing the IDV impacts the insurance claim amount. Since IDV is the maximum amount that insurance company pays as a compensation, lowering such IDV will result in a lower compensation being paid.
For instance, you lower the IDV of your car which originally was set to ₹3.5 lakhs to ₹2.5 lakhs to save on some premium. However, if your car is stolen, you will be compensated only ₹2.5 lakhs instead of the original ₹3.5 lakhs as determined by the insurance company. Hence, you will face a financial loss despite having an insurance cover by your side.
* Standard T&C Apply
An opposite scenario where you increase the IDV will result in a higher compensation, but you will have to pay extra premium for such additional coverage. Hence, it is best to not tamper the IDV as the rates are decided taking into consideration the depreciation on your car. Also, such depreciation rates are standardised by the regulator. You can use a car insurance premium calculator to assess the impact of IDV on your premium amount. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.