When you get your car insured, the insurance coverage and the premium to be paid depends on the IDV or Insured Declared Value of the car. The IDV is calculated depending on the market price of the car. The IDV you choose along with the registration year, model/variant, and city of registration will decide the premium amount.
As the car becomes older, its market price reduces every year. This will reduce the IDV of the car and the premium. During car insurance renewal, you need to check the IDV of the car before you go ahead with the renewal.
The following are certain details about the IDV that you need to be aware of while renewing your car insurance:
- IDV in car insurance represents the coverage of the car. The car is covered for this amount. Any insurance claim is limited to the IDV. It doesn’t mean that the entire IDV will be paid out. This is the maximum amount you would be paid for a claim.
- The IDV is calculated by subtracting depreciation from the initial value. After one year, the depreciation will be 5%. 15% after one year, 20% after 2 years, and so on. The maximum depreciation is 50%, which will be reached after 5 years. IDV calculation includes the cost of the car, as well as cost of the accessories.
- You need to check the IDV before you renew the policy. The IDV must offer sufficient coverage for the car. You can compare IDV and premium rates of different insurers before making the choice.
- You have the option to change the IDV. You can reduce the IDV, if you want to pay a lower premium. You must remember that reducing the IDV will reduce the money you get in case of a claim. If your car is stolen, then your claim will be less than or equal to your IDV. This may not be sufficient to take care of your losses.
- You can even increase the IDV. This will allow you to get higher compensation, in case of an accident or theft. A higher IDV will increase the premium you need to pay for renewal.
- It is important to set the right IDV. The IDV for your car should be related to the market price of your car. Do some research to find out the market price of your car and use that as the basis to set the IDV.
- If you want the highest possible coverage, you can buy the invoice price add-on cover for your insurance policy. This cover ensures that the price you paid for the car at the time of purchase will be considered as IDV. This ensures maximum coverage but your premium will be the highest.
The IDV plays an important role in car insurance renewal. It is important that you set the right IDV, so you get adequate coverage for your car.