Purchasing an insurance policy to get coverage and compensation for any loss or damage is important, but coverage amount is a major concern for the policyholders. The coverage amount or claim amount is generally determined by taking the insured declared value (IDV) into consideration. IDV in insurance refers to the market value of the insured vehicle declared by the policyholder during policy purchase or renewal.
While vehicle owners need to get their vehicles insured, it is also mandatory by law, especially for commercial vehicle owners. Commercial vehicles are an asset to the firm or business enterprise that performs certain activities for the smooth and seamless functioning of the business and therefore, one must declare the IDV in an insurance policy to get maximum benefit.
Factors that Influence IDV in Insurance for Commercial Vehicles
To calculate IDV in insurance for commercial vehicles, certain essential elements are taken into consideration –
- Model and Age of the Vehicle – The age of the commercial vehicle and its model is the topmost element that is taken into consideration to determine the depreciation cost and market value of any vehicle.
- Depreciation Costs – The age of the vehicle and other wear and tear caused due to its usage determine the depreciation percentage to determine its market value. The depreciation cost percentage increases gradually with the age of the vehicle.
- Additional Accessories – Any modification or addition of accessories in the commercial vehicle to facilitate trading operations is also taken into consideration during IDV calculation.
How to Calculate IDV in Insurance for Commercial Vehicles
One can calculate IDV in insurance for commercial vehicles by using the IDV calculator available online to get error-free results instantly. IDV calculator requires various information like vehicle registration year, accessories, etc. and will instantly display the current market value of the commercial vehicle.
Based on the market value, the IDV calculator will also display the appropriate IDV for declaration in the insurance policy. The online IDV calculator is free of cost and helps individuals to negotiate with the insurer during policy purchase or renewal.
Methods to Calculate IDV in Insurance for Commercial Vehicles
There are two methods to calculate IDV in insurance for commercial vehicles –
- Commercial Vehicles with Accessories – (Vehicle’s Manufacturing Price – Depreciation Costs) – (Accessories Costs – Depreciation Costs of Accessories)
- Commercial Vehicles without Accessories – Vehicle’s Manufacturing Price – Depreciation Costs
Depreciation Costs to Calculate IDV in Insurance for Commercial Vehicles
|Vehicle’s Age||Depreciation Percentage|
|6 months or below||5%|
|5 years and above||50%|
Importance of Declaring Appropriate IDV in Insurance for Commercial Vehicles
Policyholders need to declare appropriate IDV in insurance for commercial vehicles as –
- Declaration of high IDV during policy purchase or renewal will hike the premium payment amount and will make it an expensive affair. It is a misconception that a high IDV declaration with an extra premium amount is beneficial during the claim procedure, however, insurance companies do analyse the current market value of the vehicles and sanction the claim amount accordingly.
- Declaration of a low IDV during policy purchase or renewal will reduce the premium amount value and might look like an affordable option, however, it is generally not advisable to declare a low IDV as it will reduce the claim amount during settlement procedures.
- Declaration of the appropriate IDV in insurance for commercial vehicles helps the policyholder to enjoy the perks and benefits of the policy in case of any loss or damage caused to the vehicle. The policyholders will be able to get the maximum claim amount if the IDV in insurance is appropriately declared in comparison to the market value of the vehicle.
Things to Keep in Mind
- IDV in insurance does not include the purchase price or maintenance cost of the vehicle
- IDV in insurance does not include miscellaneous expenses of the vehicles like toll plaza taxes, parking charges, etc.
- IDV is the maximum claim settlement amount the policyholder will get, in case they want coverage or compensation for any loss or damages caused.
- Online IDV calculation enables the policyholder to negotiate with the insurance company and settle on the right IDV value.
- Will both vehicles have the same IDV if they are purchased on the same date?
IDV in insurance will be influenced by age, usage, modifications, etc. If both vehicles have some sort of difference in their usage or other parameters, the IDV in insurance will differ.
- Can I keep the same IDV of my vehicle during policy renewal?
With every renewal in the policy the age of the vehicles increases, therefore one has to change the IDV in insurance as per the depreciation costs.
- Do modifications in the vehicle influence the IDV in insurance for commercial vehicles?
Any addition of accessories or modification of the vehicles influences the IDV in an insurance policy. Therefore, one must inform their insurance company about any internal or external changes made in the vehicle.
- What is the depreciation cost percentage of a vehicle that is not even a year old?
The depreciation cost percentage of a commercial vehicle that is not even a year old is between 5%-15%.
- Can I save some money by declaring low IDV in insurance for commercial vehicles?
One can save money by declaring a low IDV in insurance for commercial vehicles, however, in case of any accidental loss or damage, the insurance company will render compensation as per the IDV and the remaining amount has to be borne by the vehicle owner which might become expensive.