The facility of vehicle insurance is a boon for numerous auto buyers as it allows the people to flexibly pay for the sum of their belonging. Almost all of the prospective buyers in India tend to go for auto insurance in order to maximise their savings and keep a check on their budget slab. If one plans to buy cars, he can even avail the benefits of vehicle insurance through the dealerships itself. However, car insurance might also turn out to be a curse if one is not aware of the exact factors and regulations, which can affect the premium. Each auto insurance scheme is designated certain premium, which gets calculated after assigning the Insurance Declared Value (IDV). In simple words the IDV is the current market value of the vehicle being bought through a specific dealer.
The figures of IDV are decided by the insurer itself by calculating the manufacturer's listed price on a specific model minus the rate at which the car has depreciated. Generally, insurance and registration charges are excluded from this calculation, however, fitting of any extra accessory other than the ones mentioned by the manufacturer, may lead to increase in the declared value. After the insurance provider has agreed on this figure, the premium gets calculated accordingly. The entire declared value becomes the total compensation amount, which will be given by the insurer to the policy-holder in case of any adversity. The depreciation rate of the car is also standard and is usually determined by the chart, which compares this rate to the age of the vehicle.
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In case the vehicle is not exceeding 6 months, then the rate of depreciation is assigned as 5 percent.
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If vehicle exceeds 6 months but is aged less than 1 year, the rate is 15 percent.
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For a vehicle exceeding 1 year but less than 2 years, the rate of depreciation is 20 percent.
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If the vehicle exceeds 2 year but is less than 3 years, rate is 30 percent.
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If the vehicle has exceeded 3 years but less than 4 years, rate is 40 percent.
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When the vehicle is aged more than 4 years but less than 5 years, rate of depreciation is 50 percent.
In case, the vehicle is aged more than 5 years, then the figure of declared value is decided as per a mutual agreement between both parties. In such a case, the depreciation rate of the car is not considered but the declared value is assessed on the basis of condition survey done by the authority. To sum up, the IDV is the total amount, which will be refunded to the auto insurance holder when his/her car meets with an unexpected occurrence. This declared value is advised to be always kept as close to the manufacturers’ actual car price so as to obtain maximum benefit of vehicle insurance. It must be noted that the declared value is directly proportional to the premium of any insurance policy; thus, indicating that higher premium would return maximum amount in case the car gets stolen or damaged.
