10/19/2015

WhatisIDVandwhyisitimportant?

WhatisIDVandwhyisitimportant?
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Caraccidents,breakdownsandrepairscancauseamajorfinancial
setbackifyoudonthavetherightamountofinsurance.Inordertobe
adequatelyprotected,youneedacomprehensivecarinsuranceplan
withsufficientridersandaffordablepremium.Todothis,youneedto
knowexactlywhatyourepayingfor.ThatswhereIDVcomesintothe
picture.
WhatisIDV?
Simplyput,IDVisthecurrentmarketvalueofyourvehicle.IDVrefers
tothehighestsumpayablebytheinsurerforavehicleinsurance
policy.Itisthusthemaximumamountyoucanclaimincaseoftotal
lossortotalconstructivelossofyourvehicle,orincaseitgetsstolenor
damagedbeyondrepair,withinthepolicyperiod.
Forinstance,ifyourvehiclesmarketvalueisfixedatRs.7lakhsatthe
startofthepolicy,themaximumamounttheinsurancecompanywill
compensateyouwillbeRs.7lakhs.
CalculatingInsuredDeclaredValue
InordertoarriveattheIDV,yourinsurerusesthefollowingeasily
availabledatapoints,andthenadjustsitwiththestandarddeprecation
ratesasperIndianMotorTariff:
Carregistrationdetails
Citywherethevehicleisregisteredavailableontheregistration
certificate
Firstpurchaseorregistrationdateavailableontheregistration
certificate
Currentregistrationtypeindividualownerorcompanyowned
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WhatisIDVandwhyisitimportant?

Manufacturer,makeandmodelofthevehicle
Cubiccapacity:(autopopulatedbasedonmanufacturerand
modeldetails)
Vehicledescription:(autopopulatedbasedonmanufacturerand
modeldetails)
Exshowroomprice:(actualpriceofthecarplusthestatetax
autopopulatedfromadatabase)

IDVandPremium
TheinsurancepremiumpayableisdirectlyproportionaltotheIDV.
Hence,asyourvehicleages,thepremiumdecreases.IRDAI
(InsuranceRegulatoryandDevelopmentAuthorityofIndia)policy
statesthatthemaximumdeclaredvalueforyourvehiclecanbe95%of
itsformershowroomprice.Hence,withinsixmonthsofpurchase,the
valueofyourvehicledepreciatesby5%.
Thedepreciatedvalueofyourvehicleisarrivedatbasedonthe
followingschedule:
AgeofVehicle

DepreciationChart

NewCar1st
Year

Insurancedoneat95%ofExShowroomPrice.5%DepreciationisDeducted

on2ndYear
Renewal

20%DepreciationisDeducted.Insurancedoneat80%ofOriginalExshowroom
Price

on3rdYear
Renewal

30%DepreciationisDeducted.Insurancedoneat70%ofOriginalExshowroom
Price

On4thYear
Renewal

40%DepreciationisDeducted.Insurancedoneat60%ofOriginalExshowroom
Price

On5thYear
Renewal

50%DepreciationisDeducted.Insurancedoneat50%ofOriginalExshowroom
Price

6thYearOnward 10%to15%DepreciationonIDVValueofPreviousYearisDeductedYearonYear
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WhatisIDVandwhyisitimportant?

ThingstokeepinmindwhilecalculatingIDV
Asexplainedabove,theIDVcanfallwithinacertainrangebasedon
theexshowroompricethatyourinsurerhasconsidered.Astheowner
ofthevehicle,notknowingthecorrectIDVofthevehiclemightresultin
youreceivinganinadequatecompensation.
ItsbetternottounderstatetheIDVbyquotingafigurethatislower
thantheactualmarketvalueofyourvehicle,becausethoughthis
wouldmeanyoumayhavetopaylesserpremium,italsomeansyou
willgetlesserinsurancecover.
Similarly,dontoverstatetheIDVthinkingthattheclaimamountwill
consequentlyincrease.AhigherIDVwillnotnecessarilyfetchyoua
higherpricewhenyouaresellingyourvehicle.Also,pleasenotethat
whiletheclaimdependsontheIDV,itisalsoinfluencedheavilybythe
typeofloss.
NowthatyouareawareofwhatIDVmeansandimplies,checkout6
MotorInsuranceTermsYouMustKnowBeforeYouClaim.
LookingforsomespecificinformationregardingCarInsurance?Letus
knowinthecommentsandwellgetbacktoyou.

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