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Old 14th September 2017, 17:01   #31
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Default Re: Increasing your Car's IDV during insurance renewal -Whats your take?

Following is what i learnt from my interactions with surveyors of different insurance providers.

IDV is the maximum value of the car that the insurer is liable to pay. If a car is declared a total loss or is stolen, it is only then that the IDV is looked at. Another time IDV is looked at is when assessing damage coverage. Insurance companies declare the car a total loss if the repair expense is expected to cross a certain percentage of IDV (75%-80% is industry standard). In most cases with high repair costs, the dealer works hand in glove with the insurer in declaring the car a total loss. In such cases, it is good to check with FNGs for repair costs.

Every car has a market value associated with it - decided by market dynamics, resale value and demand for that particular model. The insurer is aware of this value. Let us call this as A. Every insurer has a depreciation table for every model they insure. Let us call this B.

Case 1: The car is declared a total loss. A and B are both more than the IDV. This is generally the case for a new car (less than 6 months). You will get back IDV-depreciation for number months after policy issue that has passed (remember IDV is the value on the day of issue of policy and depreciation will be calculated on IDV for every day that passes).

Case 2: The car is a total loss. IDV (-depreciation) is more than B. The insurer will perform a market survey to determine if A is less than B. You can perform a survey of your own and inform the insurer if your A is more than what he quotes. The insurer is then liable to pay you lowest of the A and B. However, negotiation skills of the insured plays an important role here. Insurer pays only balance of what is decided and salvage value. Unfortunately in India there is no rule/law that governs salvage value. So the insurer generally gets a free hand.

In rare cases, the insured gets back full IDV or close to what the IDV is like the case shared earlier in the thread.

Moral of the story: Always know the market value of your car. Keep IDV around this market value. You will only increase your premium year on year without real benefit when a situation of total loss happens by keeping high IDVs. Remember, some of the add-ons like zero dep protection depend on IDV. Increasing IDV for an old car not only increases basic premium but also some add-on costs.

Experts, please correct my understanding if I am wrong.

Hope this helps!
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