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For fleet owners, simply buying commercial vehicles for their business is a big expenditure. Add to that vehicle maintenance and operational costs, and the expenses rise up. So it is imperative that such an expensive asset is dutifully insured. But there are many questions regarding commercial vehicle insurance that are unanswered. In this article, we will discuss one of the most frequently asked questions, what is IDV in commercial vehicle insurance, and how to calculate it.
What is IDV in insurance?
IDV stands for Insured Declared Value. It is essentially the maximum amount that is fixed by your insurance provider that will be assuredly paid in the event your commercial vehicle is subject to theft or an accident. The Insured Declared Value is agreed upon at the beginning of each policy period for the commercial vehicle. IDV evaluates the current value in the market that your vehicle actually holds, taking depreciation costs into account. The amount that comes out as IDV for your commercial vehicle is the sum that your insurance provider will pay you in the event of any mishap such as theft or total loss.
IDV Calculator for Commercial Vehicle Insurance
The basic formula for calculating the IDV for your vehicle is by subtracting the depreciation cost of the vehicle from the selling price as dictated by your vehicle’s manufacturer. The depreciation costs are decided on the basis of the condition of the vehicle’s parts, its age, etc. Below you will find the depreciation schedule for your commercial vehicle on the basis of the age of the vehicle:
|Age of Vehicle||% Depreciation for calculating IDV|
|Not exceeding 6 months||5%|
|Exceeding 6 months but not exceeding 1 year||15%|
|Exceeding 1 year but not exceeding 2 years||20%|
|Exceeding 2 years but not exceeding 3 years||30%|
|Exceeding 3 years but not exceeding 4 years||40%|
|Exceeding 4 years but not exceeding 5 years||50%|
While calculating the Insured Declared Value for your commercial vehicle, there are certain other entities that you will have to take into account. Firstly, the cost calculated for the IDV of your vehicle does not include the registration cost and insurance cost for your vehicle.
Secondly, if your commercial vehicle has various accessories fitted into it that did not come equipped by the manufacturer, then the depreciation cost for them is calculated separately and added on to the IDV, should they require to be insured.
The final formula for IDV comes out to be:
IDV = [Manufacturer’s listed selling price – depreciation value for the vehicle] + [Cost of additional accessories (if applicable) – depreciation value of the accessories (if applicable)]
If in case your commercial vehicle is being insured without any additional accessories, then the formula for the calculation of IDV becomes simple. You just have to minus the depreciation cost of the vehicle from the manufacturer’s listed selling price for the commercial vehicle. The depreciation value for your commercial vehicle can also be figured out with the help of the table depicted above.
A major point to keep in mind is that while the maximum sum under IDV is assured by your policy provider, you are bound to receive this compensation only if your commercial vehicle is subject to theft, or there is a comprehensive total loss to the vehicle. Also, you will be entitled to this remuneration only if your commercial vehicle is under the specified policy term.
IDV calculation is important not only to determine the maximum sum you will get from your insurer for your commercial vehicle, but also to establish the premium that you are bound to pay. You must ensure that the cost of the premium is rightfully calculated on the basis of the IDV of your commercial vehicle. This exercise can help you avoid paying unnecessarily large amount of premium during your policy period.
You may want to reduce the Insured Declared Value for your commercial vehicle in order to pay less premium amount. However, this exercise is not recommended since while reduced IDV can have you pay less premium, it can also make you entitled to a lesser claim amount, or even lead to a disputed claim. You must settle on an IDV amount that is the nearest to the actual market value of your commercial vehicle, since that will help you gain a more appropriate claim while going for claim settlements.
IDV calculation is an important task to carry out both at the time when you purchase your commercial vehicle, and during renewals. Ensure that you have the correct IDV amount as discussed with your insurance provider to be subjected to rightful commercial vehicle insurance claim.
While getting a commercial vehicle insurance, settling on the right premium amount is crucial. And with the help of IDV, you can come down to the correct amount to pay as premium. Thus, you can take help of this guide to know all about Insured Declared Value and calculate it for your commercial vehicle to enjoy the best commercial vehicle insurance benefits!
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