Calculation of IDV
This IDV will be set as your maximum sum assured amount in case of total damage of your car. Just consider IDV as the current market value of your vehicle and is fully reimbursed, if you claim for a complete loss of your vehicle. Technically, IDV is calculated on the manufacturer’s listed value of the car minus the depreciation value of the car. The depreciation value of the car is based on the age of it as follows:
||% Of Depreciation
|Up to 6 Months
|6 Months to 1 Year
|1 - 2 Years
|2 - 3 Years
|3 - 4 Years
|4 - 5 Years
|More than 5 years
||Mutually agreed value between the company and the insurance holder
Importance of the IDV
The IDV primarily determines the premium amount for the own damage coverage of the comprehensive insurance package. The larger the IDV, the greater the premium. For instance, the IDV of a brand new car will be higher than an old one, owing to a higher depreciation rate. So, the newer car will fetch a higher premium amount because of its greater value.
The premium is derived as a percentage of the IDV, and it is determined for the own damage section of coverage. Whereas the third party liability section of the premium is determined the cubic capacity of the vehicle.
Always keep a check on the IDV at the time of renewal
When your policy is up for renewal, do not just agree to pay the premium amount. Always check the IDV of your car. Make sure the premium price charged is reasonable and in tandem with your IDV. Since this is the final amount that you will get, in the event of total damage, make sure that your IDV is right.
If not, negotiate with the insurance provider and arrive at the right premium for your IDV. Keeping an eye on your IDV is ideal. If you have declared a lower IDV, you will pay a lower premium, but at the time of a total loss claim, you will not get back much.
You would then have to fork out on all your savings. So, it is always best to declare the right IDV for the optimal premium amount that you are liable to pay.
IDV is the principal value that is used to calculate the premium amount for you own damage coverage of the comprehensive insurance plan. The manufacturer’s selling price of the car is adjusted to the depreciation value of the car, to arrive at the final IDV. It is also the sum assured amount.
All insurance holders should be aware of this and make sensible decisions before they buy an insurance policy.