When you decide to purchase a new car, you don’t just blindly visit any showroom and purchase the first one that you see- you first research, compare and then choose the one that suits your needs the best. In a similar way, when you are purchasing an insurance policy for your vehicle, ensure that you scrutinize all of its aspects and compare them with your needs. After all, purchasing a good car insurance policy is as important as buying a good motor vehicle.
Further, an insurance policy will even protect you against the perils when you are plying on the streets. However, insurance companies charge you with a certain amount of money in the form of premium for the services that they provide you. However, many-a-time, people often compromise on their vehicle’s protection by opting for a car insurance policy with the lowest premium. But they forget to consider the fact that the best things often come with a price-tag. Thus, today we will be discussing the impact of reducing your IDV and deductibles on your motor insurance policy.
What is IDV?
But before that, let us understand the concept of IDV and deductibles as a whole. IDV or your insured declared value is the amount of money that the insurance company will be liable to pay you in the case of damage or theft of your car. Your car’s IDV decreases with each passing year; because, your vehicle’s value depreciates with its increasing lifespan. However, you do get the option to change the values of your IDV during car insurance renewal.
What is a deductible?
The amount of money that you have to shell out for repairs of damages to your vehicle is termed as a deductible. Further, deductible has two parts in it- voluntary and compulsory. A compulsory deductible is the fixed claim amount that you have to pay to the car insurance company; whereas, the voluntary deductible is the amount that you decide to pay on your own. Again, you have the option to alter the values of your voluntary deductible during car insurance renewal.
How do IDV and deductibles affect your insurance premium?
The car insurance company decides your premium amount on the basis of the make and model of your vehicle, your engine capacity, location, accumulated NCBs (no-claim bonuses), coverage, deductibles, IDV (insured declared value), etc. Therefore, what we can understand from this information is the fact that your IDV and deductibles of your car insurance play a huge role in determining your insurance premium. Therefore, you can opt for a lower IDV and higher deductible to decrease your premium amount.
However, with the decrease in the premium amount of your motor insurance; even the protection offered by the insurance companies is reduced. Meaning, if you decrease the IDV then you will receive a lower amount of claim money (in the case of theft or loss of your car). And if you opt for additional car insurance deductible then you will have to shell out more amount of money for the cars’ repairs.
Therefore, in our opinion, if you believe that you aren’t the type to be a part of an accident, then you can choose to lower your IDV and increase your deductibles to save on the premium amount.