Insured declared value (IDV) is a very important component of car insurance. It has an overall impact on the pricing and claim settlement of the plan. There are some factors that affect the IDV. We take a look at these factors in the points below. In this article, we also explore the concept of IDV in detail and help you understand your car insurance cover better. Take a look.
How IDV affects premiums in car insurance
When you buy a car insurance plan, the IDV is assessed and declared. It is a common value that both you and your insurer agree upon. But how is it calculated and what effect does it have on the car insurance premiums? Let us find out:
- Calculating IDV: First and foremost, let us see how the IDV is calculated. For every year that you own the vehicle, a part of its value depreciates. This makes the market price of the particular vehicle lower as well. So after six months of purchase, the car stands at 95% of its original value. After two years, the IDV stands at 20%, after three years 30%, four years 40% and five years 50%. This is a straightforward calculation that you can understand and apply to your car insurance.
- IDV and car insurance premium: Now, let us understand the bearing IDV has on your car insurance premium. It actually has a direct impact on the premium. This is because the premium of your plan depends on the size of the cover. When the IDV is high, your car has a high valuation and is covered with a high car insurance cover. The premium of the high cover is also high. Similarly, when the IDV is low and your car is cover is lower too, the premium is less too. Therefore, the IDV does have a very strong impact on the premium of your car insurance policy.
- IDV and car insurance claims: The IDV also affects the car insurance claims. This is because if your vehicle is stolen or it is completely damaged, your insurance provider will pay you compensation according to the IDV. So here too, the insured declared value plays a very crucial role.
Depreciation in a car insurance policy
The concept of depreciation in car insurance is not an alien one. As you saw from the points mentioned above, the IDV is a very simply and open factor that everyone understands with ease. Your vehicle, like all other things in the world, depreciates with time. Your car insurance provider takes cognizance of this and adjusts your cover accordingly. You can however use a zero depreciation rider and protect your insurance cover against the IDV.
The zero depreciation rider is available with all the comprehensive motor insurance plans. You will have to pay a higher premium, but you will get the full value of the car as compensation if it is stolen or damaged, irrespective of its age. Do some research about the zero depreciation cover and see whether or not it useful for you. If you have a very expensive car, such a rider may come in very handy for you. You need to buy the rider at the time of buying the plan or when renewing. So speak to your insurance provider beforehand and complete all the formalities on time.
Interesting facts about IDV in car insurance
Here are some interesting facts about IDV:
- IDV for old cars: If your car is older than five years, the insurer will run a manual assessment of the vehicle. You will then be informed about the IDV they think is correct. If you agree to it, your insurance cover will be adjusted accordingly.
- Only for comprehensive plans: The concept of IDV only plays out in the comprehensive car insurance Since your own vehicle is not covered under a third party plan, you do not have the insured declared value in such a cover.
These are two of the most important factors about IDV that you must be aware of.
Keep all the points mentioned above in mind and you won’t get confused about IDV. The IDV is a logical and deciding factor for your car insurance premium and claims. So never neglect it. Understand what it is and make sure your car insurance cover is adjusted correctly after calculating the IDV.