Insurance is a well-known requirement for all vehicle owners in India. The law—Motor Vehicles Act of 1988—lays down this need to purchase a motor insurance cover. Different motor insurance plans provide either limited coverage with a third-party policy or a complete 360-degree range using a comprehensive plan. The selection of the procedure depends on what your requirements are. But when shopping for one, you stumble upon jargon that makes it tricky to comprehend, a critical one being the IDV. Be it private or commercial vehicle insurance online, and this term is consistent across the policy document. This article expands on the meaning of IDV and the myths surrounding it. Let’s have a look:
What is Insured Declared Value or IDV?
The maximum amount that an insurer pays as per the insurance contract terms is Insured Declared Value or IDV. In the event of a total loss, constructive loss, or theft, the IDV comes into the picture. IDV is often misconstrued as the vehicle’s resale value, but in reality, it essentially differs from the approximate value of the car/bike.
The IDV is the critical component that comes into play to determine the premium when buying vehicle insurance online or offline. Thus, it is vital not to undermine the importance of setting the right IDV.
Now that you know the meaning of IDV, let’s look at some of the misconceptions surrounding it.
Myth #1 – IDV is the maximum amount that can be claimed in one policy tenure
IDV is often miscomprehended to mean the maximum amount that is allowable for you to claim during one policy tenure. But the truth is you can make an unlimited number of claims during a policy tenure. The only caveat is each of these claims needs to be below the set IDV. If any claim exceeds 75% of such IDV, it is presumed to be a total loss claim, and the entire IDV shall be paid. * Standard T&C Apply
Myth #2 – the insurance company exclusively determines IDV
The fact about IDV is completely misstated by way of this myth. The regulator, the Insurance Regulatory and Development Authority of India (IRDAI), determines the depreciation of your vehicle for up to five years, which helps decide the IDV. Also, the insurers allow you to declare a higher IDV, in effect, impacting the premium. After such 5 years, there are no prescribed guidelines, and the IDV decided mutually. You can visit the official website of IRDAI for further details.
Myth #3 – IDV is the current market value
The most common misconception about is IDV that it is the current market price of the car. However, IDV is much lower since the element of depreciation impacts the valuation. Hence, IDV is not synonymous with the current market value.
Myth #4 – You can save on premium by declaring a lower IDV
While one of the ways to keep your insurance premium in check is declaring a lower IDV, it has far reaching effects. It reduces the amount of compensation that the insurance company shall pay. Thus, it requires you to pay a higher out-of-pocket expense for repairs at the time of claim and would also mean that you receive a lower compensation in case of theft or total loss.
These are some of the myths you need to stay clear of; make sure to set the right IDV in your bike or car insurance policy. Also, remember that 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.