Purchasing a car is truly a responsibility; not only do you need to maintain it with timely services, but you also need to keep it insured to protect it from unforeseen circumstances. Hence, you need to remember the date of renewing your car insurance policy as you would your anniversary or your birthday. This way, your car would always be covered from damages and you would not be breaking any laws.
Technology has made the purchase and renewal of car insurance policies an extremely simple affair. However, before renewing your car insurance online, it is important to understand and set the correct Insured Declared Value (IDV) for your car.
But what is IDV and how does it affect your car insurance policy? Let us read further to understand this in detail.
Definition of IDV
The Insured Declared Value (IDV) of your automobile is the current market value of your car. For example, if the IDV of your car was set at Rs 5 lakh at the time of purchasing/renewing the policy, then the insurer is liable to pay you up to a sum of Rs 5 lakh depending on the situation. The full payout is mostly only given in the case of total loss or theft, while most other claims only receive a partial payout.
You already know that as with all things, even the value of your car reduces with each passing year. Moreover, any accidents or calamities your vehicle overcomes would also add to its years and conversely negate its value. Hence, the IDV of your car is calculated after considering its age (depreciation).
How is IDV calculated?
Depreciation is a major factor when it comes to calculating the IDV of your automobile. The Indian insurance watchdog, the Insurance Regulatory and Development Authority (IRDA), has standardized the terms to calculate depreciation.
Given below is a table that you can refer when you calculate IDV.
| AGE OF VEHICLE | % OF DEPRECIATION |
| <6 months | 5% |
| >6 months but ≤1 year | 15% |
| >1 year but ≤2 years | 20% |
| >2 years but ≤3 years | 30% |
| >3 years but ≤4 years | 40% |
| >4 years but ≤5 years | 50% |
| >5 years | Mutually decided between the policyholder & the insurer |
IDV and car insurance
It is always wise to compare car insurance policies available in the market before purchasing one. This seems to be true even in the case of car insurance. Hence, you need to make a correct analysis of your requirements and ensure that it aligns with the benefits of your policy of choice. Several insurers will offer you different quotes, but play it smart and ask about the IDV for which the quotes are provided. As exemplified earlier, the sum assured in the case of theft or total loss of your car is known as the IDV.
How to decide the IDV?
The IDV is directly proportional to the premium, i.e. a lower IDV means that your car insurance premium will also be less. However, the amount you would receive in the case of a total loss or theft would also be less. On the other hand, a higher IDV would mean spending more on the premium; however, you would receive a bigger payout in the event of a total loss or theft.
It is advised that you follow a balanced approach and choose the right IDV for your car. You can always consult a professional if you are unsure and get your queries answered.
Online car insurance renewal
You’d be surprised to know that car insurance renewal online is an effortless as well as a time-saving process. Waiting to renew a policy whose term has ended would prove to be counter-intuitive in the unfortunate event of an accident as you would be ineligible to make a claim. Hence, one should never wait for their policy term to end and renew their car insurance policies on time.
