Our car is one of our prized possessions. We take care of it like our baby and get it serviced and polished regularly to keep it sparkling clean and tidy. After all it has become a symbol of status for many of us in the society. Just one accident can lead to major expenses out of our pocket thus causing budget disruption if we don’t have the right insurance policy.
We don’t realize the significance of having a comprehensive and accurate coverage in car insurance until an unfortunate accident takes place. When it comes to buying insurance, we have a very careless attitude, we usually go with the insurance company that is offering the cheapest quote. Just purchasing a comprehensive insurance plan does not cover your car completely. As it is often said, “You get what you pay for”! This is the same case with car insurance.
For instance, you are involved in an unfortunate incident where your car has suffered major damage but luckily you have escaped unhurt. You contact your insurance provider and tell them about the mishap and discuss on claim process to get your car repaired. You give details about the policy to the insurance company. You get a shock of your life to know that the IDV of your car is very low and you will have to incur major expenses out of your own pocket.
You did not consider the IDV factor when buying the insurance policy and just blindly went with the policy that was offering the cheapest quote. Your careless attitude on selecting insurance policy has come back to haunt you now.
What is Motor IDV?
Full form of IDV is Insured Declared Value. It is the core component of any car insurance policy. It is the maximum value that the insurance company is liable to pay you in case of total loss of your vehicle. Insured Declared Value is calculated for a specific term considering the current market value of the vehicle – taking into consideration depreciation and other wear and tear of the vehicle.
So, the maximum sum assured that the policy holder will receive is the IDV amount mentioned on the insurance policy.
For example – If your car was purchased for Rs. 6 lakh and it has completed more than a year. The IDV value of the car should be around Rs. 5 lakh.
How is the Calculation of the Motor IDV Done?
Insurance companies follow a set depreciation pattern that has been set by IRDAI (Insurance Regulatory and Development Authority of India)
|Car Age||Depreciation percentage for calculating IDV|
|First 6 months||5%|
|Over 6 months but less than a year||15%|
|Over a year but less than 2 years||20%|
|Over 2 years but less than 3 years||30%|
|Over 3 years but less than 4 years||40%|
|Over 4 years but less than 5 years||50%|
For vehicles which are more than 5 years old, an assessment is done by the insurance company before deciding on the IDV of the vehicle. Factors such as condition, cubic capacity, registration certificate details, make, model and availability of the car come into play in deciding the IDV of the vehicle.
Things to remember while considering Motor IDV in the Insurance Policy
Vehicle’s age is a crucial factor while calculating IDV of a vehicle. People who don’t understand the concept of the IDV may get tempted to go for lower car insurance premium policies. It is not advisable to sacrifice precious IDV for a small decrease in premium payable. With the decreasing age of the vehicle the IDV will anyway decrease as car’s value gets depreciated but getting the right IDV on an insurance policy is a must at all times.
It is always wise to choose the IDV, which represents the fair value of the car. So, if at all there is an unfortunate accident then you will be paid proper compensation which will help to get your car back on the road without it creating a financial burden on you.
Selecting the accurate IDV in an insurance policy is as crucial as getting the insurance policy itself. Next time, when you are shopping for your motor insurance lookout for the three most important letters “IDV” in your motor insurance policy to make sure your insurance policy will be of good value to you when you make a motor insurance claim.