Car Insurance Claims & IDV - Everything You Need to Know!

Posted on: Feb 7, 2022 | | Written by:

Car Insurance Claims & IDV - Everything You Need to Know!

Published on February 07, 2021. EST READ TIME: 3 minutes

Accidents are a sad reality of life, no matter how carefully you drive your car. And no one can predict them. Now, if your car gets damaged in an accident, the repair cost can be quite high, particularly if the damage is severe. Which is why, having car insurance is so important. By law, you are required to hold at least third party insurance for your car, but it does not offer any protection to your own vehicle. This means, getting comprehensive car insurance makes more sense because it provides own damage cover, which helps you claim the cost of car repair from the insurance policy if the need arises.

The concept of claims in car insurance:

Claims are instances of damage or loss to your car where you need the insurance company to bear a part of the repair costs. Such claims arise in the following cases:

• If your car gets stolen

• If your car meets with an accident

• If your car suffers damage in any natural or manmade calamity

Claims cannot arise in case of wilful ignorance or illegal activities like drunk driving or commercial use of private vehicles.

The process of making a car insurance claim:

Following are the steps for filing car insurance claims:

• Inform the car insurance provider that an instance of claim, like an accident, has occurred

• Drive the car to a garage (preferably a cashless network garage) if the car is in a drivable condition and the insurance company is fine with it

• Wait for the car insurance surveyor to come in and assess the car

• Collect all the claim related documents like vehicle papers, license etc. and submit the claim form with it

• Answer any queries from the claims department

Once your claim is approved, the cashless garage will fix your car and bill you your share. You can make your payment and drive away. The garage and insurer will handle the rest between them.

The concept and role of IDV in car insurance

Insured Declared Value (IDV) is the notional value of the car as per which the insurance company will provide you protection. Consider it as the maximum worth of your car which the insurance company will be able to take as the limit to which they will service the claims on the car if a damage or loss occurs.

How does car IDV impact your car insurance premium

The premium for your car insurance has a direct relation to the IDV. The higher the IDV, the higher will be the premium. This is the reason why expensive cars cost more to insure than lower priced cars. Since insurance companies provide you the flexibility of setting up your own IDV, you can increase or reduce the premium cost by moving the IDV of your car upwards or downwards. Obviously, you need to identify the right balance between getting a premium discount with a lower IDV and getting lower premium costs since it directly impacts your ability to claim. Let us look at this with examples.

• Claims in case you have lowered the IDV

Lowering the car IDV can lead to the reduction in the premium amount for car insurance. Let us say that you took car insurance for a car with actual IDV of INR 5 lakhs at a lower IDV of INR 4 lakhs. This provided you roughly a 20% discount on premium. Now, in case you need to make a claim, you are also limited to INR 4 lakhs minus depreciation, and other government levies etc. If your car becomes a total loss, you will receive a lower amount as final settlement since your IDV itself was lower. Hence, it is not recommended to lower the IDV of the car.

• Claims in case you have increased the IDV

Increasing the IDV of your car will lead to a higher premium but also provide you greater protection. Let us take the case where car IDV as per rules was INR 5 lakhs but you increased the IDV by 20% to INR 6 lakhs. Here, you will be able to get a higher claim amount from the policy and the threshold for declaring a total loss of car will also rise in a proportionate manner. This will allow you more flexibility in repair costs. It is recommended to keep the IDV of the car higher, especially for new cars and high-end cars.

All in all, it is important to ensure that you keep the number of claims on your car insurance as few as possible. Remember that if you make too many claims, it will have a direct impact on your car insurance premium. By not making claims, in a year, you will get 20% discount on your own damage cover premium as no claim bonus. After five years, the no claim bonus will be 50%, which will effectively reduce the premium cost by half. Moreover, if you keep on making frequent claims on your policy, it will lower the default IDV of your car, thereby increasing the car insurance premium. It will also have a significant impact on the resale value of the vehicle.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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