If you have a comprehensive motor insurance policy then you must be aware of Insured’s Declared Value (IDV). It is the maximum sum assured of your vehicle in your motor insurance policy. This is the maximum value that your insurer will pay in case of theft or total loss.
Normally, IDV is fixed on the basis of the manufacturer’s listed price of the vehicle and depreciation, etc. Your insurer fix insured declared value of your vehicle at the time of commencement/renewal of the policy.
If you are planning to buy a new motor insurance policy or renew it then you must check your vehicle final IDV. There should be the correct value of your vehicle in the policy. Ultimately this the maximum market value of your vehicle.
Why Insured’s Declared Value is a very important factor for you?
This is the factor which is directly proportional to the premium for the insurance policy. If your IDV is higher side then the premium will be higher. If the insured declared value is low then the premium will be lower side.
You must think twice while deciding the IDV of your vehicle. If your insurer providing you very less value of the vehicle then you can negotiate with the company. You request to increase it up to a certain level.
Having a very low value is not a good idea. Buying lower IDV policy will reduce the premium but it also reduces the coverage of your vehicle.
Factors which determine the Insured’s Declared Value
There are many factors that decide the value of your car or two-wheeler. Following are the main factors:
- Make and Model the car or two-wheeler
- RTO Location
- Age of the vehicle
- Depreciation Rate
IDV mainly depends on the make and model of your vehicle. Obviously, a high-end luxury car will have higher IDV in comparison to mid sedan car. The age of your vehicle is also a deciding point. Very old vehicles will have lower value and new vehicles will have a higher value.
The market value of any vehicle is also depending on its city of registration. Insured declared value is fixed on the basis of a standard rate of depreciation.
If the vehicle is less than six months old then there is a 5% depreciation. For more than six months and less than one year 15%. If the vehicle’s age exceeding one year but less than two years then 20% depreciation.
When vehicle age exceeding 2 years but less than 3 years then 30% depreciation. If the vehicle’s age exceeding 3 years but less than 4 years then the rate of depreciation is 40%. If it is more than four years old but less than five years then the depreciation rate is 50%.
Should you keep IDV low or High?
This is a very crucial and important question. Many people may get confuse that which is good for them. A higher value will cost you a higher premium. But it is beneficial at the time of claim because you get a claim according to higher IDV.
Lower value will cost you less premium. But it is not beneficial at the time of claim because you will get a claim according to lower IDV. So, should you always buy a higher IDV policy?
My answer is that You should know the current market value of your vehicle. Insured declared value (IDV) should be close to this market value. It is the best selection.
Check IDV at the time of Policy Inception and Renewal
You should have eyes on IDV every year. When you buy a policy the first time then you must research and get the best one. But sometime you may notice that at renewal time your company has reduced the IDV more than your expectation.
For example, When Mr. Srivastava purchased his first car insurance and IDV was Rs. 10 lac. But when he got renewal notice to renew the policy, the company reduced IDV to Rs. 7.5 lac. So, he finds so much gap in his vehicle current value and first years value.
He contacted his insurer and negotiated the value and finally company fixed Rs. 9 Lac. This was the expected value for Mr. Srivastava and he agreed for that. An example is only for understanding purposes.
You should also check your vehicle insured’s declared value at the time of renewal also. If you find any gap then you must contact your insurer to fix the correct IDV in your policy.