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Old 18th July 2009, 19:30   #1
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Default IDV value for a new car - Only 95% of ex-showroom value?

This came as a rude shock to me. I was informed that a new car is normally insured only for 95% of it's ex-showroom price. I had always assumed that IDV of a new car is it's ex-showroom price.

Imagining this to be a con, I did some googling and came upon this link -
WhatCar? India - Insurance Details

Quote ->
"12. INSURED DECLARED VALUE OF A CAR
The Insured Declared Value (IDV) for a new car is taken at 95 percent of the ex-showroom price. The value depreciates by 5 percent within six months, going up to 50 percent for cars aged four years and more.

The premium on cars is calculated on the following lines:
  1. Upto 1000cc with age of car not exceeding 5 years.
    3.127% (Zone A), 3.039% (Zone B)
  2. Between 1000cc - 1500cc
    3.283% (Zone A), 3.141% (Zone B)
  3. Above 1500cc
    3.440% (Zone A), 3.343% (Zone B).
The percentage increases as the car gets older. Zone A includes metros like Mumbai, Delhi, Bangalore, Hyderabad, Ahmedabad, Pune, Chennai and Kolkata while Zone B accounts for the rest of the country."

Can anybody on t-Bhp working in the insurance field clarify why the IDV is taken at 95%? I was told that one could, by paying extra premium, insure it at 100%, but how many would actually check this?
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Old 18th July 2009, 20:08   #2
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Quote:
Originally Posted by kuttapan View Post
...a new car is normally insured only for 95% of it's ex-showroom price.
THis has come about over the last few years, when insurance rules and regulations were modified to benefit the owner. Imagine the following:

Scenario 1: Street price of your car is Rs.100,000, ex-showroom price is Rs.200,000. You insure the car for Rs.150,000. The car is stolen/a total loss. You claim for Rs.150,000, but insurance co. pays you Rs.100,000, because that's the correct street price of your car. However, you've borne the cost of insuring the car for Rs.150,000, so you feel cheated.

Scenario 2: Street price of your car is Rs.100,000, ex-showroom price is Rs.200,000. You insure the car for Rs.150,000. The car is stolen/a total loss. You claim for Rs.150,000, and insurance co. pays you Rs.150,000, because that's the insured value of your car. The insurance co. is cheated.

So now, under new regulations, comes Scenario 3: Street price of your car is Rs.100,000, ex-showroom price is Rs.200,000. You want to insure the car for Rs.150,000, but the insurance co. only LETS YOU insure for Rs.100,000. The car is stolen/a total loss. You claim for Rs.100,000, and insurance co. pays you Rs.100,000, because that's the correct street price of your car. No one loses.

Once you drive out of the showroom, it is assumed that your car instantly loses at least 5% of its showroom price - because, if you sell the car to a second owner, you are expected to get a little less than the sticker price. Ergo, the insurance co. insures it for 95% of its showroom price. If you insist on insuring it for a higher price, you would need to give that in writing, and even then, the co. would only give you 95% of the showroom price if total loss occurred 10 seconds after you drove out of the showroom in a brand new car registered in your own name. So why insure for more?

Last edited by SS-Traveller : 18th July 2009 at 20:10.
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Old 18th July 2009, 21:02   #3
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The way it has always worked in the case of insurance is that in case of total loss one gets the sum insured or the market price, whichever is less. Unfortunately what this means is that you are not covered for replacement cost to an extent. The guiding principle has always been that one should not profit from insurance losses, as one would if one got paid a sum that is more than the current market price. This way, the insurance companies are now being upfront about the cover and the charge for it.
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Old 18th July 2009, 23:46   #4
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I usually get my new car insured for 90% of showroom value.. intentionally.
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Old 19th July 2009, 13:31   #5
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Originally Posted by Sawyer View Post
The way it has always worked in the case of insurance is that in case of total loss one gets the sum insured or the market price, whichever is less. Unfortunately what this means is that you are not covered for replacement cost to an extent. The guiding principle has always been that one should not profit from insurance losses, as one would if one got paid a sum that is more than the current market price. This way, the insurance companies are now being upfront about the cover and the charge for it.
Well world wide new cars are insured at 95% of the Ex-showroom price. In the UK there is a type of insurance called Gap Insurance. In the case of a total loss, GAP insurance pays for the difference between normal insurance pay-out and the Ex-Showroom price of a car. Now the thing about this is it is a one time payment made during buying the car and is valid for 3/5 years provided you still own it.
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Old 19th July 2009, 15:28   #6
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(In UK, you loose a lot more than 5% on that trip home from the dealer. More like 20%. It is the most expensive trip a car ever does. One looses the tax for a start (vat 15%? I forget) which is considered to be part of the cost of brand-new-car-ownership, not something that a used-car buyer is going to help you out with!)
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Old 19th July 2009, 16:00   #7
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Quote:
AbhiJ : I usually get my new car insured for 90% of showroom value.. intentionally.
Abhi, any specific reason ?
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Old 20th July 2009, 10:39   #8
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Quote:
Originally Posted by kuttapan View Post
Can anybody on t-Bhp working in the insurance field clarify why the IDV is taken at 95%?
The minute you drive out of the showroom, your car will lose 5% of its ex-showroom value. At the very minimum.

Quote:
I was told that one could, by paying extra premium, insure it at 100%, but how many would actually check this?
Don't. When its time to claim, the insurance company will still pay you as per their own depreciation tables.
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Old 20th July 2009, 12:41   #9
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Originally Posted by GTO View Post
Don't. When its time to claim, the insurance company will still pay you as per their own depreciation tables.
IIRC there was a case against an insurance company wherein the insurer had deducted payment from the IDV on total loss. The court ruled in favour of the insured that asked the insurer to pay the full IDV.
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Old 21st July 2009, 15:27   #10
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Originally Posted by SS-Traveller View Post
THis has come about over the last few years, when insurance rules and regulations were modified to benefit the owner. Imagine the following:

Scenario 1: Street price of your car is Rs.100,000, ex-showroom price is Rs.200,000. You insure the car for Rs.150,000. The car is stolen/a total loss. You claim for Rs.150,000, but insurance co. pays you Rs.100,000, because that's the correct street price of your car. However, you've borne the cost of insuring the car for Rs.150,000, so you feel cheated.

Scenario 2: Street price of your car is Rs.100,000, ex-showroom price is Rs.200,000. You insure the car for Rs.150,000. The car is stolen/a total loss. You claim for Rs.150,000, and insurance co. pays you Rs.150,000, because that's the insured value of your car. The insurance co. is cheated.

So now, under new regulations, comes Scenario 3: Street price of your car is Rs.100,000, ex-showroom price is Rs.200,000. You want to insure the car for Rs.150,000, but the insurance co. only LETS YOU insure for Rs.100,000. The car is stolen/a total loss. You claim for Rs.100,000, and insurance co. pays you Rs.100,000, because that's the correct street price of your car. No one loses.

Once you drive out of the showroom, it is assumed that your car instantly loses at least 5% of its showroom price - because, if you sell the car to a second owner, you are expected to get a little less than the sticker price. Ergo, the insurance co. insures it for 95% of its showroom price. If you insist on insuring it for a higher price, you would need to give that in writing, and even then, the co. would only give you 95% of the showroom price if total loss occurred 10 seconds after you drove out of the showroom in a brand new car registered in your own name. So why insure for more?
In the case of a write-off or stolen etc, you get the depreciated value. Not market value. (and how can anyone determine the market value without arguments?)
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