How IDV Affects at the Time of Commercial Vehicle Insurance Renewal?
Are you planning to renew your commercial vehicle insurance policy? If yes, then many insurance providers may be contacting you to provide the best deal. On the other hand, if you are among those who have started searching and comparing various commercial vehicle insurance renewal plans and their premiums, then you are not doing anything wrong, but remember to be careful while doing so. While the insurers may be quoting a lower premium for the insurance of your commercial vehicle, at the same time, they might be keeping the Insured Declared Value (IDV) of your vehicle low. Read more
When we talk about vehicle insurance, IDV or Insured Declared Value is known as the ‘sum insured’. It is the amount for which your vehicle is insured. Therefore, it forms the basis of all the settlements when your vehicle damages or gets stolen. So, if different insurance brokers or agents or insurance aggregators are providing you varied quotes for commercial vehicle insurance renewal, then it is time to evaluate everything carefully. You should not opt for a policy just by seeing its lowest premium.
There are two types of vehicle insurance plans available in the market, one is third-party insurance and the second is comprehensive vehicle insurance. While third-party insurance is mandatory by law, comprehensive insurance provides cover for two-risks. The first risk is associated with own damage of the vehicle and the second is associated with third-party risk.
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Therefore, for the premium of a comprehensive insurance plan, wherein own damage is also covered, the insured declared value of the vehicle plays an important role. So, it is suggested to keep an eye on IDV when you are going to get a new insurance plan for your vehicle or when you are renewing it.
- IDV of Your New Commercial Vehicle: Initially, when you purchase a new commercial vehicle, the IDV depends on the listed selling price as mentioned by the vehicle’s manufacturer according to its model and brand. So, for a new vehicle, IDV is calculated according to the manufacturer's mentioned ex-showroom price and reducing it by depreciation. Generally, the depreciation of a new commercial vehicle is 5% so the maximum insured declared value of a new vehicle is 95%.
- IDV of the Older Vehicles: If your commercial vehicle is older than five years, or for the obsolete vehicle models, the IDV is fixed as per the mutual agreement between you and the insurer. However, sometimes when your vehicle is more than five years old, you may have concerns especially at the time of commercial vehicle insurance renewal. If it is a running vehicle insurance policy, then the insurance provider cannot deny the renewal. However, some add-ons like zero depreciation cover may not be available for vehicles that are older than five years. In addition to this, the insurance provider can add extra to your commercial vehicle insurance premium to make it non-competitive for renewal. In other words, we can say that the insurance provider can make it the insurance premium extra expensive so that you have to think twice before renewing it. However, a third-party insurance policy cannot be denied by any insurance provider as it is compulsory as per the motor vehicle act of India.
- IDV at the Time of Insurance Policy Renewal: When you purchase a vehicle insurance policy or go for commercial vehicle insurance renewal, the premium of the policy is calculated as per the vehicle's depreciation value. However, as an owner of a commercial vehicle insurance policy, you have the liability of fixing the IDV. Being an owner of a commercial vehicle, you can alter its IDV at the time of commercial vehicle insurance renewal. The maximum cap and limitation vary with the insurance provider.
How Much Can Insured Declared Value Vary?
The IDV gets fixed after considering the rate of depreciation. There is still some chance if a you want to tweak it a little bit. The IDV can vary because the insurance provider enables you change it by adding or reducing 15%. So, if the default insured declared value offered is Rs. Three lakhs, then you can select IDV between Rs.2.55 lakhs and Rs.3.45 lakhs. However, if a mishap occurs, then you may not be able to claim the entire IDV amount. In such a case, the claim amount may depend on the type of claim and damage to your commercial vehicle. So, at this point, we all must remember that the Insured Declared Value is the maximum amount for which the vehicle is insured. In addition to this, a higher Insured Declared Value attracts higher premiums for your vehicle’s insurance.
What Should You Do?
So, when different insurance providers provide different IDV for your vehicle, what should you do at the time of renewing your commercial vehicle insurance? The experts say that it is true that different insurance providers offer different values of the IDV of your commercial vehicle and this as well makes a slight difference in their insurance premiums. For such cases, you should opt for an insurance provider who is offering you the most optimum rate of IDV and at the right premium amount.
The Final Words!
At the time of commercial vehicle insurance renewal, you may get the lower value of IDV, which brings the premium of your insurance policy down. However, while doing so, you may not have covered many risks, which is the actual value of your commercial vehicle. So, it is recommended to get the full value of your vehicle’s IDV as this would be the amount that your insurance provider will pay in case of your vehicle’s complete damage or if it gets stolen. In addition to this, when you get the documents of your insurance policy or its cover notes, make sure that the values are the same as you have agreed upon at the time of policy purchase. So, we can say that the IDV plays a major role when we are going to renew the insurance of our commercial vehicle.
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