Thinking of renewing your car insurance? Here’s why it’s important to set the IDV correctly

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Car insurance policy and IDV

New Delhi : Opting for a car insurance policy is not only a precautionary measure that helps protect your vehicle from damage and theft, but under the mandate of the Government of India, it is also a legal obligation. According to the Motor Vehicles Act 1988, third party car insurance is essential for all four-wheelers traveling on Indian roads. While third party car insurance policies cover damage caused by the insured car to a third party, they do not cover the car itself. This is where comprehensive auto insurance policies like those offered by Bajaj Finance become more conservative options for car owners.

Comprehensive car insurance plans compensate policyholders against damage caused by the vehicle to third parties, as well as damage and theft of the insured car. To ensure comprehensive coverage, insurance companies must determine the value of their insured’s car. IDV or Insured Declared Value is the current market value of an insured car after taking into account depreciation. This is the maximum amount that the insurance company will pay the policyholder in the event of damage or theft. While most policyholders compare the premium costs, umbrella coverages, and add-on benefits of comprehensive auto insurance plans, they often overlook or underestimate the importance of IDV calculations when making these comparisons.

Understanding IDV Calculations

Insurance companies consider depreciation costs when determining a car’s IDV. This depreciation cost corresponds to the decrease in value of your vehicle as it ages. In other words, with the growing age of the car and its regular use, some wear and tear is to be expected. This results in the devaluation of the overall cost of your car in the market. All car insurance The supplier will factor this age-related depreciation cost into the IDV calculations to effectively reduce the maximum claims coverage for your car.

While IDV depreciation rates are fixed for cars up to 5 years old, for vehicles over 5 years old the rate is mutually agreed upon by the insurance company and the car owner. The factors considered when considering IDV calculations are:

  • Depreciation rate
  • Age
  • Model
  • Brand
  • Registration details

Estimating your vehicle’s IDV is essential when renewing an insurance policy to get the most out of your umbrella coverage.

Why is determining the right IDV for your car insurance policy essential?

By setting the right IDV, customers get certain advantages and advantages. Since auto insurance policy premiums depend on estimates of the vehicle’s IDV, after depreciation assessments have been recognized, policyholders often consciously reduce the IDV of their cars to reduce premiums. However, it can be detrimental when filing claims. To receive sufficient compensation for damages, it is advisable to freeze the IDV according to the current value of your vehicle. Because auto insurance companies use policyholders’ LDI as the equivalent of their maximum claim amounts, undercutting LDI estimates to reduce premiums can result in underpayments when paying. theft or damage to the insured vehicle. This, in turn, defeats the purpose of owning an auto insurance policy.

Updating IDV Estimates When Renewing an Auto Insurance Policy Online

Since the depreciation costs of a car model must be factored into the IDV calculations, it is essential to review the IDV estimates each time policyholders renew their auto insurance plans. Our two partners Bajaj Allianz and Acko offer comprehensive car insurance plans. These plans come with liability coverage and comprehensive personal accident and vehicle damage coverage. With affordable premiums and partnerships with in-network garages that offer a cashless claims facility, policyholders can maximize the benefits of their auto insurance policy against a minimal expense ratio. These plans are available for purchase online through a 100% digital platform on the official website of Bajaj Finance Limited. Here you can get more information, compare features, benefits and premiums offered by our partners and choose the policy that suits your needs.

To sum up, policyholders must set correct IDV estimates and update them when renewing their comprehensive auto insurance policies to obtain an adequate indemnity payment when reporting the insured car lost or damaged. by it. While setting a higher IDV will increase premium payments, a lower IDV can lead to insufficient claims payouts, forcing policyholders to pay out of pocket.

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