If you own a two-wheeler or a four-wheeler, it is mandatory for you to buy third-party insurance. It will not only keep you safe on the road but will also provide for the damages and injury to the vehicle.
However, not many are aware of how the insurance policy premium is calculated. In order to ensure that you have an adequate amount of cover, you need to learn how Insured Declared Value(IDV) is calculated and how it affects the motor insurance premium.
What does IDV mean?
The IDV of a vehicle is the current market price of the vehicle. It is the maximum sum assured, which the insurance company will pay in case of the claim being raised due to a loss or theft of the vehicle.
For example, if the market price of your car is fixed at INR 500,000, then the IDV will be INR 500,000 and when you raise a claim, the maximum claim amount you can receive is INR 500,000.
Factors on which IDV is calculated
You might have used a car or two wheeler insurance calculatorto estimate the amount of premium payable on your insurance policy. However, you need to understand how IDV of the car is calculated. There are different factors, which play a significant role in the calculation of IDV.
The insurance company will use the registration details of the car, the city in which the car is registered, the first purchase as mentioned in the registration certificate, the type of registration, the cubic capacity of the car, details of the manufacturer of the car, model of the car, description of the vehicle and ex-showroom price. The company will use all these factors and then adjust it with the standard depreciation rate.
IDV and your premium
There is a clear relationship between the vehicle insurance premium and the IDV of the vehicle. As the vehicle ages, the premium and the IDV will decline. The maximum declared value of any vehicle could only be a maximum of 95% of the showroom price of the vehicle.
It is important to ensure that you do not understate the IDV of the vehicle. If you do not get the IDV right, you might not get adequate claim amount when you file for the same. Do not overstate the IDV of the vehicle under the assumption that the claim amount will also increase.
The aforementioned point is of utmost significance because there is no guarantee that a higher IDV will mean a higher price when you sell the vehicle. It is also important to remember that claims are not settled only based on the IDV but also on the type of loss.
When you understand the importance of IDV, you can make the right decision while youbuy motor insurance online. If you do not know how to estimate the value of your vehicle, ask for the required help from your insurance provider. Do not forget the due date of bike/ car insurance renewal every year.