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Importance of Setting the Correct IDV for Your Comprehensive Car Insurance Plan

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It is a legal mandate to buy car insurance in India. As per the law, all car owners need to hold a valid car insurance policy to drive on the roads.

Car insurance is not merely a legal requirement but also a financial cushion. Car insurance policies are insurance products that compensate you financially if something unfortunate happens to your vehicle.

Earlier it was a time-consuming and complicated procedure to buy a suitable car insurance policy. Nowadays, you can purchase a plan after comparing them online. For instance, you can get the TATA AIG four wheeler insurance by visiting their official website and selecting a suitable insurance plan after comparing the different plans available.

The car insurance premium cost depends on several factors, like the car’s features, your location, add-on covers, IDV etc. Many insurers provide car insurance calculators on their websites wherein you can calculate the premium for your car insurance details. Through the insurance calculator, you can understand how different factors play a crucial role before you buy car insurance. Out of all the factors, the car’s IDV plays a huge role in the final premium cost.

What is IDV in car insurance policies?

The Insured Declared Value (IDV) is the sum assured for your car under the policy. It is the maximum claim allowable as per the car insurance policy if your car is damaged during an unfortunate event. If your vehicle has been stolen or has been damaged beyond repair, your insurance company will reimburse the total IDV set during policy initiation.

The IDV is calculated by factoring in the current market value of the vehicle. This is because the vehicle begins to depreciate as soon as it exits the showroom. Your car will depreciate with time. Depreciation is the main criterion used for calculating the reduction in the car’s value based on its age, regular wear and tear etc. An older car has a higher depreciation.

The formula for calculating a car’s IDV:

IDV = Sale price of the car as per the manufacturer – Depreciation as per the car’s age

The IDV of a four-wheeler will differ for different insurance companies. Therefore, it is crucial to factor in the IDV for your insurance for the car before purchasing the plan. If you get a comprehensive plan without checking the policy, you may not get the desired amount in case of an unfortunate event.

Importance of setting the accurate IDV for your comprehensive car insurance plan:

The IDV of a car plays a crucial role in a comprehensive car insurance plan.

There are two elements of car insurance that are directly affected by the IDV of the vehicle: the claim amount and the car insurance premium. Let’s look at each of them in detail.

Car Insurance Maximum Claim amount: The IDV is the highest claim amount your insurance company will pay if your four-wheeler gets damaged beyond repair or is stolen. If you set a low IDV, the insurance claim amount you get may not be sufficient to cover the total cost of replacing or repairing the car. Then you may end up paying out of your own pocket for the additional expenses which can be quite substantial at times. It would be better to opt for a comprehensive insurance policy with a sufficient IDV amount.

Car Insurance Premium: The IDV value of car insurance will directly impact the premium of the comprehensive car insurance plan. A high IDV of the car insurance policy will lead to a higher premium amount. It is essential to opt for an IDV amount that leads to a reasonable car insurance premium.

You should keep your budget in mind when selecting a comprehensive car insurance plan although the premium must not be too low. You can use a car insurance calculator to understand the IDV and the premium of the car insurance plan before purchasing the plan.

Summing up

If you’re a four-wheeler owner, you must get decent car insurance in India for your vehicle. You can use the car insurance calculator to get the most optimal plan for yourself. While purchasing the insurance plan, you must set the correct IDV amount for your policy. Setting the right IDV amount will save you from paying a high premium or getting a low claim amount.

Some Frequently Asked Questions (FAQs)

  • What is the importance of IDV in car insurance?

The Insured Declared Value is the highest sum assured amount you are eligible to get in the event your car is damaged beyond repair or if it’s stolen. You must set your IDV carefully, as it must be adequate enough to cover the damage.

  • Should I increase the IDV value?

The IDV of your vehicle is your vehicle’s market value less depreciation. A higher IDV can help you get a high sum assured amount when you file a claim. However, it can lead to a higher premium to be paid.

  • Does IDV reduce every year?

The value generally falls as the car depreciates annually. The value is mutually agreed upon between the policyholder and the insurance company during the policy renewal.