Car owners usually get confused about the car’s IDV when going for an insurance policy purchase. IDV or the Insured Declared Value is an important element when you are buying a car insurance. Hence you need to have adequate information about it to buy the best protection for your four-wheeler.
What is IDV?
IDV is the maximum amount you get from the insurer in case of a total loss or theft. This sum is decided during the initial phases of the car insurance buying process. Usually, the IDV amount is decided according to the overall market value of the car.
For instance, if the invoice amount is Rs. 6 Lakhs, then, the below is the amount claimable as compensation if the car is stolen or damaged beyond repair:
1 – For 1st year the IDV will be 95% of this amount
2 – For every subsequent year, the IDV reduces by 10%
How it impacts premium?
The IDV value of your insurance directly impacts the premium. Higher IDV leads to a bigger premium amount, as you get more cover for your car. Similarly, a lower IDV lowers the premium payable. This is the reason why experts suggest a careful calculation of IDV by keeping the car’s age and current market value in mind.
What happens when you keep it too low?
To keep the premium amount low, many car owners try to keep IDV as low as possible. However, this won’t be advisable. Keeping the IDV too low can sometimes backfire in case of theft or total car loss.
In the worst case scenario, a low IDV can limit you from getting effective compensation for your loss. You will end up in loss even with the insurance as the compensation might not be adequate enough.
What happens when you keep it too high?
Going too high with the IDV is also a problem. The whole point of getting an insurance for your car is protecting yourself from a loss. But a very high IDV way beyond the market value will also be a loss-making proposition for you as a car insurance policyholder. Your premium amount would go way higher than what the car actually requires. Some policyholders also keep the IDV very high thinking that when they are selling the vehicle, this factor will help fetch a higher price for the used car. However, this is not true.
What should be the ideal amount?
The ideal amount of your IDV should be aligned with the current market value of your car. Try keeping the value as near to the market value of your car as possible. This way, you can keep yourself away from going too low or too high with Insured Declared Value.
Also, remember that the age of your car also decreases the required IDV. The older your car gets, the lesser IDV is should get.Calculating the correct Insured Declared Value for your car is critical. But, you need to be very clear about the scenarios before making your final decision.
To sign off, if you are thinking about increasing your car’s Insured Declared Value, evaluate the current market value first. Try to match that and you will find the perfect IDV and ideal insurance coverage for your car.
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