More often than not, the insured find themselves in a fix and anxiety takes over when their insured vehicle is seriously damaged and/or destroyed. Judgements about actual losses exceeding the sum insured make them even wearier. Let us thus make the understanding of Insured Declared Value easier.
The Concept of Insured Declared Value (IDV)
The Insured Declared Value is the amount that is fixed at the beginning of each policy period of the insured vehicle. This IDV is deemed to be the 'Sum Insured', i.e. it is the maximum amount your insurance company will indemnify in the event of damage/loss.
Computation of IDV
IDV is fixed based on the following two factors:
(1) Manufacturer's Listed Selling Price (of the Vehicle and Accessories if any fitted to the Vehicle)
(2) Depreciation based on Age of the vehicle
Insured Declared Value (IDV) = Manufacturer's Listed Selling Price + Value of Car Accessories - Depreciation
Based on the factual age, the following schedule* chalks down the basis of depreciation percentages that are needed to be applied to (1) above. The price to be considered by the insurer is the current listed price at the beginning of policy period/renewal.
|
Age of the Vehicle (X)
|
% of Depreciation on the Listed Selling Price
|
|
Less than 6 Months
|
5%
|
|
6 Months<X < 1 Year
|
15%
|
|
1 Year<X < 2 Years
|
20%
|
|
2 Years<X < 3 Years
|
30%
|
|
3 Years<X < 4 Years
|
40%
|
| 4 Years<X < 5 Years |
50% |
|
More than 5 years
|
Note 1
|
Note 1: For age exceeding 5 years and/or if the concerned vehicle is now obsolete in nature, it is at the discretion of the discussions and negotiations between the insurer and the insured to make a deal.
Simplifying the above concept, let us take an example:
Mr. A bought a car on 01/04/2013 whose Listed Selling Price is Rs.5 Lakh on that day. He opts for an insurance policy on 30/06/2013 (in this case, age of the car is less than 6 months). The current market value of that model is Rs.5 Lakhs; the depreciation applied to such a vehicle would thus be 5% of Rs. 5 Lakhs.
In the same case, if he renews his policy on 01/04/2015, the price considered would be the current listed price of the manufacturer, say Rs.4.5 Lakhs (as on 01/04/2015) and depreciation at the rate of 30% would be applied accordingly (as age is 2 years).
Remember, the IDV is the maximum amount that the insurer is liable to compensate on occurrence of damage or loss.
The IDV so fixed shall be treated as the net Market Value throughout the period of the policy for the purpose of Total Loss/Constructive Total Loss (TL/CTL) claims.
In case where the aggregate cost of retrieval and/or repair of the vehicle ** exceeds 75% of the fixed IDV, the insured vehicle shall be treated as a Constructive Total Loss (CTL)
* Please note that the above depreciation schedule applies only to TL/CTL claims.
** Subject to terms and conditions of the policy.