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Insurance Article

Insured Declared Value - Simplified

August 04 2015
know-your-options-08-15

Know your options

Age of the Car

Rate of Depre-
ciation

Less than
6 months

5%

6 months to
1 year

15%

1 year
to
2 years

20%

2 years to
3 years

30%

3 years to
4 years

40%

4 years to
5 years
50%

Know more about Insured Declare Value (IDV)

It is important to dig deeper and find out the meaning and implications of insurance terminology, in order to fully understand the scope of your policy. Being vague or ignorant about certain terms can cost you money.

As a motor insurance customer, you must have come across the term Insured Declared Value (IDV). In simple terms, IDV refers to the current market value of your vehicle. It is the maximum amount you can claim in case of the theft or total loss of the vehicle. IDV is arrived at by deducting the depreciation of the vehicle from the manufacturer's listed selling price. IDV does not include the cost of registration and insurance.

In case you wish to insure accessories that are not factory-fitted, you need to incur additional charges for this. It is not included in the IDV.

The depreciation on your vehicle increases every year. The insurance company uses a depreciation chart in order to calculate the depreciation of your vehicle.

In case of vehicles that are more than 5 years old, the depreciation is not taken into account for IDV calculation. The IDV is mutually agreed upon by the insurer and the insured, after considering the condition of the vehicle. A surveyor or dealer inspects the vehicle and prepares a report, based on which the IDV figure is computed.

The Importance of disclosing the correct IDV

In third party insurance, premium is computed based on the make and model of the vehicle. In own damage (OD) policies, the coverage is comprehensive, covering damages due to accidents, natural disasters and man-made calamities. In OD policies, the premium is calculated on the basis of the IDV.

There is a dangerous trend of showing a lower IDV figure, in order to pay a reduced premium. A lower IDV can prove to be extremely costly for you, in case of a claim.

For example, if the actual IDV of your car is Rs. 9 lakhs and you have declared a figure of 8 lakhs as the IDV, the maximum amount that you can claim in case of a total loss would be Rs. 8 lakhs. It is equally futile to declare a higher IDV in the hope of getting a higher claim amount. At the time of making a claim, the insurer considers the age and the depreciation of the vehicle before approving the claim amount. This may result in a lower claim amount in spite of having declared a higher IDV and paid a higher premium.

Every time you renew your vehicle insurance, it is important to declare an IDV that is commensurate with the age and the model of the vehicle.

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