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Why should you set the correct IDV for comprehensive car insurance policies?

Four-wheeler insurance is mandatory for all vehicles in India. If you are caught driving an uninsured car, you need to pay a fine for violating the country’s laws. Precisely the reason why most of us buy insurance. However, car insurance goes beyond abiding by the vehicle laws of the country.

It offers you financial security if you incur monetary expenses or liability arising out of the vehicle. It covers your financial penalties if your car gets damaged, stolen, or destroyed owing to natural or human-made calamities. It handles your third-party liabilities if the vehicle causes injuries or damage to the third-party person or asset. You also receive compensation if the accident results in your disability or death.

Broadly, you can either buy a third-party or comprehensive insurance plan. The third party covers you against third-party legalities arising from your car. On the other hand, you receive broader coverage under a comprehensive plan by including add-ons.

Which is the ideal plan for your car?

The ideal car policy is the one that provides adequate coverage to pay off the financial liabilities arising out of your car without paying costly premiums. You need to strike the right balance between insurance coverage and premiums.

Thus, before buying the car insurance policy, you should thoroughly analyse the coverage you will receive for your premiums. Use the insurance calculator to know the premium of the plan accurately. You can find the instrument easily online and check different premiums offered by other insurers.

The auto insurance calculator considers parameters like insurance type, car details, geographic location, add-ons, and the IDV for determining the policy premium. The IDV is the biggest factor that influences the premiums of the comprehensive policy.

What is IDV?

The Insured Declared Value is the maximum sum insured amount fixed by the insurance company. It is the maximum claim amount that your company agrees to pay under the insurance policy if your vehicle gets damaged due to an unforeseen accident. In case of theft or a total loss, the insurer pays you the entire IDV as decided when buying the insurance. The IDV gets determined based on the current market value of your vehicle.

This is because the value of your car starts depreciating as soon as it moves out from the showroom. Even if the vehicle is as good as new after a year, it suffers depreciation owing to its age. Depreciation is considered an estimated reduction in the vehicle value following its age. The higher the age of the vehicle, the higher depreciation on it.

The calculation of IDV is as follows:

IDV = Selling price of the car as listed by the manufacturer – Depreciation depending on the age of the vehicle

Now, the IDV differs between insurers. Hence, it is essential to check them before you buy offline or online car insurance. Meanwhile, the depreciation for older cars is fixed for up to five years.

Why decide the correct IDV?

Premium

The IDV of the vehicle is directly proportional to the premiums of the comprehensive policy. The higher the IDV of the insurance plan, the higher will be the premiums. Therefore, opt for an IDV amount that does not result in an expensive insurance premium.

Maximum claim amount

The IDV is the maximum claim amount that the insurance company pays if your car witnesses’ complete loss or gets stolen. If you opt for a lower IDV, the claim amount might be insufficient to cover the actual cost. So, choose a comprehensive policy with an IDV, which is sufficient to cover the losses of the car.