Looking at how your car insurance plan works better for you depend on the IDV (Insured Declared Value) of car declared at the time of buying the policy. Technically speaking your car insurance plan has two components and the premium that you pay is the summation of premium of both the components. The two components are two types of cover which is available under a comprehensive car policy. The two types of covers are called Own damage (OD) and third party (TP) cover. The OD component of the policy protects you from loss or damage to the car due accident, natural calamities and any other man made calamity whereas the TP component protects you from financial loss arising due to a liability created due to accidental damages resulting into permanent injury or death of a person or property who is not the policyholder in the plan. Now looking at the premiums of both the components, the premium calculated towards third party liability is always a fixed component and the calculation based upon fixed tariff as per the vehicle category and it doesn’t change with the change in the insurance provider whereas if we look at the premium of the Own damage cover it actually varies from one insurer to another plus you can actually control the price that you pay for it say by opting for various forms of discounts like No claim bonus or by installing anti-theft device in car etc. The premium of the Own damage discount is calculated on the IDV of the car which you have declared at the time of Buy or Renew Online Car Insurance Policy.
Let’s first understand what actually an IDV is? IDV is actually the highest possible claim the insurance company would pay you during the policy period in consideration. The IDV is generally arrived at the current listing price of the car and not the price at which you bought it minus the depreciation rate into consideration. Depreciation rates are standard tariff rates and depend on the age of the car. The depreciation rates vary between 5% for a six month new car to 40% for a car which is close to 4 to 5 years old. In case during the time of renewal of the policy your model of car is out of market then the IDV is decided based upon negotiations between the policyholders and the insurer. Higher the IDV higher would be the premium.
Now the question is why the actual IDV declaration is an important factor? People generally try to hide the actual IDV just to save premium but this small amount of savings can lead to huge loss in future .There might be a situation where you might have declared lower IDV during renewal and in the same policy period you are faced with a situation of claim. You already know that claims will be always be settled post calculation of depreciation and which can lead to a zero valuation of your car and nothing is paid to you by the insurance company. But on the other hand is not necessary you will get a higher claim if the IDV declared is high. The IDV should be considered at a reasonable value which should in sync with the age of the car and the model.
While Buy or Compare Car Insurance Online Policies you should keep in mind that the technology is built in such a way on the comparison websites that the IDV is reduced by certain amount as each policy period passes on and which might not be the actual IDV of the car. This may lead to unwanted devaluation of car. Always check the right IDV. Myinsurancebazaar,com gives you an opportunity to change your IDV as per reasonable value which you can set while making the comparison between various plans offered by various insurance companies.