What is the Importance of IDV in Electric Car Insurance Policies?
Electric vehicles (EVs) are gaining popularity in the automotive industry due to their zero-pollution approach. Most car enthusiasts are shifting to EVs, contributing to a greener environment. However, it is essential to maintain your EV just like any other four-wheeler to safeguard it from unforeseen perils such as accidental damage, theft, etc.
When buying an insurance policy, you should always seek comprehensive coverage to ensure maximum benefit. Another crucial aspect to consider is accurately determining the IDV.
Here’s more on IDV, its importance, and tips for choosing the right IDV amount!
What is an IDV in Electric Car Insurance?
The maximum amount an insurer pays the insured when their electric vehicle (EV) is lost, stolen, or damaged beyond repair is its IDV or Insured Declared Value. It represents your car’s current market value after the deduction of depreciation.
Insurance companies determine IDV based on the vehicle manufacturer's listed selling price and declare it at the beginning of the policy term. It remains unchanged throughout that term unless adjusted for depreciation during renewals.
Due to advanced technology, electric cars may have a higher replacement cost; thus, understanding their IDV is crucial to ensure adequate coverage.
How Can a High IDV Benefit an EV Car Insurance Policy?
A higher IDV can significantly benefit an EV car insurance policy in several ways:
● During a Vehicle Theft
Sometimes, responsible drivers agree to a low IDV with the assurance that they will never get involved in a severe accident causing vehicle damage. However, they forget that even if the vehicle is not damaged severely, it may get stolen.
In such cases, a higher IDV also ensures better compensation so that you can replace the car. So, it is better to stay prepared whether you are a safe driver or rich enough to buy a second car.
● In Case of a Serious Accident
A broken rearview mirror or headlight can be fixed easily, but some accidents can cause severe damage to your EV. The cost of repairing such damage can exceed your budget, hurting your pocket. A high IDV can cover the hefty repair bill in such a situation or compensate enough to buy a new vehicle if the damage is irreparable.
● For Security
Considering the growing pollution rate, buying an electric vehicle is no longer a luxury but a necessity. It is one of the significant investments for most middle-class car owners, so ensuring the security of their valuable possessions is essential.
While buying a comprehensive car insurance policy, individuals must negotiate for a high IDV to ensure their vehicle is secured from unforeseen perils.
What are the Factors Influencing the IDV of Your EV Insurance Policy?
Several factors influence the IDV of your electric vehicle insurance policy. Some of them are as follows:
● Age of Electric Vehicle
The age of an EV plays a crucial role in determining its IDV. The depreciation rate for older vehicles is higher than for newer ones. Thus, you can get a high IDV for a new car.
● Market Trends
The automotive market is greatly influenced by demand and supply dynamics, which can affect a vehicle's market value. Electric vehicle technology keeps evolving, making some models more trending than others. Thus, the market value of those cars increases, influencing their IDVs.
● Manufacturer’s Selling Price
The initial selling price set by the manufacturer is just a baseline for IDV calculation. It includes any additional features or accessories that may enhance the vehicle's value.
● Condition and Modifications
Any modifications or improvements made to your EV can increase its value. On the other hand, IDV can decrease due to wear and tear. Therefore, maintaining your vehicle's condition is essential to preserve its IDV.
How to Calculate the IDV for EV Insurance Policy?
You can easily calculate the IDV of your EV by using the online IDV calculator from a reliable insurance company’s website. This online tool saves time and provides accurate results when fed with the right inputs. They calculate the result using the following formula.
IDV = Manufacturer’s Selling Price − Depreciation
Here, depreciation is calculated based on standard rates set by insurers. The depreciation rate usually ranges from 5% to 20% per year, depending on the vehicle's age and type. Here is a simple guide on IDV calculation:
- Start with the ex-showroom price of your EV to determine the manufacturer's selling price.
- Apply the appropriate depreciation rate based on your vehicle's age to calculate its depreciated value.
- If you have added accessories, include their cost minus any applicable depreciation.
This calculation clearly shows your vehicle’s value during its insurance coverage period.
How to Choose the Right IDV for Your EV Insurance Policy?
Here are some of the things to consider while choosing the right IDV for your electric vehicle insurance:
● Assess Market Value
Research market prices for similar models to ensure you get the right Insured Declared Value for your EV.
● Consider Future Depreciation
Understand how much value your EV will lose over time, and consider this when deciding its initial IDV.
● Consult with Experts
Ask your insurance provider to guide you through deciding the right IDV for your car based on their experience with similar vehicles.
● Balance Premium Costs and Coverage Needs
Lower IDV can reduce your insurance premiums, but you may not get sufficient coverage during an insurance claim. Therefore, always go for an IDV that is ideal for your car, and both overvaluation and undervaluation should be avoided while deciding on an IDV.
Understanding Insured Declared Value (IDV) is essential for electric vehicle owners buying a comprehensive insurance policy for their vehicle. A well-calculated IDV influences premium costs and ensures that you receive fair compensation in case of theft or total loss.
Considering the abovementioned factors, you can determine an appropriate IDV that balances affordability with adequate protection.
Disclaimer: This article is part of sponsored content programme. The Tribune is not responsible for the content including the data in the text and has no role in its selection.
