Insurance Declared Value also called as IDV is the value in vehicle insurance where this money will be paid by the insurer to insured if the vehicle is a damaged beyond repair in an accident or stolen.
The main point to be noted is that this value is mainly for vehicles. Here the insured vehicle gets a full cover from the insurance company after deducting some depreciation cost. Vehicles as they get old will have higher depreciation cost.
IDV is calculated by the insurance company on the basis of the market price of the vehicle. Suppose you brought a brand new car which costs Rs.10 lakhs in the Indian market. After 2 months your vehicle was stolen, so that if the premium payments are clear you could claim for insurance amount which you might get around Rs. 8.5 – Rs. 9.5 Lakhs.
How depreciation cost is adjusted?
For vehicles not older than 6 months only 5% depreciation is deducted. Whereas 6 months – 1 year 15% will be deducted, which rise to 20, 30, and 40% on consecutive years. It must be noted that not all insurance companies provide same adjustments rates. It vary according to the market conditions and age of vehicle.
Premium Luxury cars gets least depreciation whereas ordinary class cars might have high depreciation where both are of same age. There are several factors that influence the depreciation. It varies according to:
- Brand
- User popularity
- Resale value
Why is Insurance is important?
The undesirable can happen any moment, so it is always recommended to have an insurance for all vehicles. It is very important to choose a plan which offers higher IDV nearer to the cost of vehicle.
