Understanding the Insured Declared Value (IDV) is crucial if you own a commercial vehicle like a truck or taxi. It plays a significant role in deciding your insurance premium and affects your claims, coverage, and the overall value you get from your policy.
Whether you’re exploring truck insurance online for the first time or planning a commercial vehicle insurance renewal, knowing how IDV works can help you make informed decisions.
The Role of IDV in Your Commercial Vehicle Insurance
The Insured Declared Value (IDV) refers to the current market value of your vehicle, minus depreciation. It essentially represents the maximum amount your insurer will pay in case of total loss or theft. For commercial truck insurance holders, IDV directly affects the premium you pay and the compensation you receive in claims.
If you undervalue your vehicle to lower premiums, you risk inadequate coverage during claims. Conversely, overvaluing it may lead to unnecessarily high premiums. Therefore, getting the right IDV is a balancing act that impacts your insurance costs and financial security.
How is IDV Calculated for Commercial Vehicles?
When calculating IDV for commercial vehicles like trucks and taxis, insurers typically consider the following factors:
- Manufacturer’s listed price of the vehicle (ex-showroom price)
- Depreciation rate as per the age of the vehicle
- Accessories fitted, if not part of the standard package
The formula used is:
IDV = Manufacturer’s Price – Depreciation + Cost of Accessories
Depreciation is applied based on the vehicle’s age. For instance:
- 6 months old – 5% depreciation
- 1 year old – 15% depreciation
- 2 years old – 20% depreciation
- And so on, up to 50% or more for older vehicles
Why a Higher IDV Means Better Coverage?
Opting for a higher IDV provides better protection in case of a total loss. Here’s why it’s worth it:
- Greater Claim Settlement: If your vehicle is completely damaged or stolen, the claim amount will match the higher IDV.
- Peace of Mind: A higher IDV ensures that your investment in the vehicle is more safely guarded.
- Resale Consideration: Higher IDV means better resale coverage if the vehicle is sold after an accident.
However, be cautious: over-inflating the IDV beyond the market value won’t help during claim settlement. Insurance companies assess the market value before settling a claim, and an inflated IDV doesn’t guarantee higher compensation.
How IDV Affects Claim Settlements?
When it comes to claims, especially in commercial vehicle insurance, IDV becomes the baseline for compensation. Here’s how it influences the process:
- Total Loss or Theft: If the vehicle is beyond repair or stolen, the insurer pays the IDV, minus deductibles.
- Partial Damage: Though IDV doesn’t directly affect partial claims, it influences how the insurer evaluates repair costs relative to the vehicle’s total value.
- Write-offs: If repair costs exceed 75% of the IDV, the vehicle may be considered a total loss.
For example, if you’re managing a fleet under commercial car insurance, the IDV can determine whether a vehicle is repairable or to be replaced. This directly affects operational downtime and financial planning.
Tips to Optimise Your IDV and Insurance Premium
To ensure you’re getting the best bang for your buck, consider the following:
1. Compare Policies Online
Check and compare truck insurance online. They usually provide side-by-side comparisons of IDV and premium offers from multiple insurers.
2. Evaluate Your Vehicle’s Usage
A delivery truck used in a metro city might depreciate faster than one used occasionally in a rural area. Adjust your IDV based on actual usage patterns during your commercial vehicle insurance renewal online process.
3. Don’t Choose Lowest Premium Blindly
Low premiums often mean low IDV. Remember, saving a few hundred rupees can cost you lakhs during claims.
4. Add-ons Matter
While IDV is essential, additional covers such as zero depreciation, engine protection, or roadside assistance can further enhance your coverage for a marginal premium increase.
5. Seek Expert Advice
If confused, seek consultation before choosing your commercial truck insurance. Some insurers offer agents or digital assistants to guide you through the IDV-setting process.
Final Thoughts
The Insured Declared Value (IDV) is much more than a technical insurance term — it’s the cornerstone of your commercial vehicle insurance policy.
Whether you own a single delivery van or manage a fleet of lorries, getting the IDV right can save you from unnecessary losses, rejected claims, or underwhelming compensation.
As you consider options for truck insurance, don’t let the premium be your only focus. A well-balanced IDV ensures you are not just insured but truly protected.