When you buy a car, its insurance, registration, and PUC are some formalities you need to look after. While the registration is a one-time process, the PUC and insurance need periodic attention. Even more so in the case of insurance since PUC is simple and straightforward compliance.
Car insurance cannot be ignored since it is a regulatory requirement by the Motor Vehicles Act of 1988. Two types of policies can be purchased: a third-party policy or a comprehensive one. When looking for a car insurance plan, IDV is a critical term that you might come across. IDV or insured declared value is the maximum amount your insurer pays in a total loss scenario like damage or theft. However, misconceptions surround the IDV; thus, you must know the truth. Here are some of the myths debunked –
#1 IDV is the maximum amount of claims for one year
There is a common myth that IDV is the claim that can be made during a year. However, the reality is different where, theoretically, there is no capping on how many shares can be made. You can make any claims below the IDV specified in your policy. These claims, in aggregate, can exceed such an amount of IDV. However, if a single claim amounts to 75% of such IDV, the insurer assumes it to be a case of total loss and pays the entire amount of such IDV. For claims, you must pay for the deductible and depreciation for the repair costs.
The insurance company decides #2 IDV
Another myth around IDV is that it is determined solely by the insurance company. Instead, the Insurance Regulatory and Development Authority of India (IRDAI) has strict IDV guidelines. These guidelines specify the depreciation rates that choose the IDV for vehicles up to five years of age. It is based on a mutual agreement between you and the insurance company for cars older than five years. Further, the insurance companies also allow you to alter the IDV within a specified range at the time of purchase. Thus, you can modify the IDV based not solely on the insurer’s discretion.
#3 IDV is the resale value of your car
This assumption often leads to the wrong interpretation of the IDV of your vehicle. IDV is often interchangeably used with the market value of your car, but the reality is far from it. The IDV of your vehicle is calculated after accounting for depreciation. This value is much lower than your vehicle’s market value, which is arrived at after considering the condition of your car, the brand, performance, and more such criteria.
While reducing the IDV can help lower car insurance prices, it is not the best way to keep your premium within your budget. This is because the lower the IDV, the lower the insurance coverage in case of a total loss to your car.
These are some myths surrounding IDV that you must not believe. Stay aware of them and use a car insurance calculator that can help decide how the IDV will impact your premium. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.
