Does The Value of Your Car Affect Its Insurance Premiums?
Your car’s market value plays a major role in car insurance, especially in determining its premium. Read this article to find out how and why.
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IDV is nothing but the Insured Declared Value. This is a concept used to determine the current market value of your vehicle. The insured declared value is calculated by subtracting the depreciation cost from the manufacturer's declared selling price. It is important that you purchase an affordable plan while purchasing your car insurance policy. In determining the cost of your car insurance premium, the IDV of your car plays an important part. This article will explain what IDV is and why it is important in the context of car insurance.
What Is The Significance of IDV In Car Insurance?
In case of extensive damage which is beyond restoration, the insurance policyholder will pay for the car the full or maximum amount of the claim that an insurer is entitled to. The amount that your insurance company pays off depends on several factors that include the present market value of the car.
Your car's value starts to depreciate as soon as you buy it. If your car IDV is low, your car insurance premium will be low and the reimbursement amount will also be low. Insurance companies are taking into account certain car details, such as its purchase date and the model, its accessories and the number of times it was serviced, in calculating the IDV.
With the age of your car your insurance premium will fall. The older the car, the lower the premium cost. This is mainly because car parts are worn and strained while you use them for a certain period of time. This wear and tear will reduce the system's efficiency and lead to depreciation. The depreciation reduces the current market value of the car, thus reducing your claim amount. Your premium is therefore declining too.
How Does IDV Affect The Cost of The Premium of Car Insurance?
Insurance companies mainly rely on the risk factor and the market value of your car to determine the cost of your car insurance premium among many other factors. To go in-depth, the reason why your car’s Insured Declared Value affects the premium is because of the following-
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Car Insurance Claim Settlement Amount
The cost of your car insurance premium is directly proportional to the claim amount that you will receive. If the company sees that they will have to provide high monetary assistance, they will charge a higher premium. At the time of claim settlement, insurance companies consider mainly the insured value of their car. In the event of an accident which caused damage to your car beyond repair, your insurance company shall pay the amount equal to your vehicle's declared insured value at the time of a claim. Therefore, you receive a higher claim amount if your car's IDV is high. Likewise, you will receive a relatively lower claim if your car's IDV is low.
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Purchase Or Renewal Of Your Car Insurance
When you buy or renew your car insurance policy, the IDV of your car will directly affect your car insurance premium. High IDV means you are paying a higher premium for insurance. A low IDV will, on the other hand, cost you a lower bonus.
Take Away
Both your car insurance premium and the amount of your claim are significantly affected by Insured declared value. Ensure that you correctly calculate the IDV of your vehicle to know how it will be used. Sensitive decision-making is the key to an affordable and maximal coverage car insurance policy. Drive safe!
Also Read:
5 Most Important Sections In Car Insurance Policy Wordings
Top Factors That Determine The Premium of Your Car Insurance Plan
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.