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All about IDV in Car Insurance

Many Indian car owners believe that car insurance is complicated. One reason for this could be the terminology used (for example, Insured Declared Value), which a layperson may find difficult to understand. Understanding their meaning and impact on car insurance coverage, premiums, and claims is one way to simplify them. Here is everything you need to know about IDV in car insurance, including what it is, how it is calculated, how to declare the correct IDV, and much more.

What is IDV in Car Insurance?

The maximum Sum Assured fixed by the insurer that is provided in the event of theft, or total loss of the vehicle is known as the Insured Declared Value (IDV). In essence, IDV is the vehicle's current market value. If the vehicle is totalled, the IDV in car insurance is the amount of compensation that the insurer will pay to the policyholder.

IDV in car insurance is calculated by subtracting the manufacturer's listed selling price from depreciation. IDV does not include the costs of registration and insurance. If insurance is required, the IDV of non-factory installed accessories is calculated separately at an additional cost.

How To Calculate IDV in Car Insurance?

The IDV Calculator is a free online tool that estimates the market value of your car as well as the ideal premium amount you should pay for car insurance. It considers the age of your vehicle as well as depreciation to determine the correct IDV for your vehicle.

It is regarded as one of the most important car insurance calculators because it assists car owners in determining the amount that they will be paid during total damage or theft claim settlement.

IDV in car insurance is calculated by subtracting the depreciation on the vehicle's parts from the manufacturer's determined selling price. The formula for calculating the actual Insured declared value is given below:

Insured Declared Value = (Company’s listed price – the depreciation value) + (Cost of vehicle accessories - the depreciation value of these parts)

The above-mentioned formula is used to calculate the IDV for a new car that has extra accessories that were added after the car was purchased. In the absence of such accessories, the IDV calculation is straightforward. Using the online IDV calculator, you can quickly calculate your Insured Declared Value.

Things You Must Keep In Mind While Calculating IDV In Car Insurance

Take into account the following factors when calculating the IDV of your vehicle:

● Deducting the depreciation value from the actual market price yields the value of your car. In any case, it is the maximum amount of compensation you will receive if your car is totalled or stolen.

● Correct IDV valuation may result in a lower premium.

● Reduce the IDV of your car only to lower the premium, as this would result in fewer claims or a disputed claim.

● A correct declaration of IDV would imply a valid claim.

● Before agreeing to the IDV set by your car insurance provider, do your research or check with the manufacturer.

● Also, evaluate the premium cost and ensure that it has been correctly calculated based on the IDV of your vehicle.

● Because it involves a large sum of money you must obtain

● adequate coverage and are satisfied with the insured declared value. You can also bargain for the desired IDV.

● When renewing your car insurance policy, make sure that the premium is calculated using the IDV. If the market value of your car is very high in comparison to the IDV, you will pay an exorbitant premium over a car that costs less.

You can also fix your car's IDV online, though this varies from insurer to insurer. It also allows you to adjust your IDV while renewing your car, so don't pass up this opportunity.

Factors That Help In Determining The IDV In Car Insurance

The following factors aid an IDV calculator in calculating the IDV of your vehicle. Let’s discuss these factors one by one.

● Age of the Car – One of the most important factors in determining your car's IDV is its age. The greater the age of your vehicle, the lower its IDV.

● Make and Model of the Car – The car's make and model help to determine how high-end the vehicle is and how much it will cost to repair. Because of its higher cost and maintenance, the IDV of a BMW X7 would be higher than that of a Hyundai Santro.

● Standard Depreciation – The depreciation schedule shown in the table earlier impacts the IDV of your car.

● City of Car Registration – The IDV is also affected by the city in which your vehicle is registered. The IDV of a car registered and operating in a metropolitan city such as New Delhi will be subject to greater risks than the IDV of a car operating in a small town in Uttar Pradesh.

How IDV Impacts Car Premium?

Your car's IDV is directly proportional to your insurance premium. This means that the higher the value of IDV, the higher the premium charged to you. Similarly, as the IDV of your vehicle decreases with age, so will the premium amount you must pay.

However, it is not recommended to choose a lower IDV simply to reduce your premium amount because this will result in losses. In the event of total damage or theft claims, a lower IDV means you will receive less compensation. The goal is to get an IDV that is close to the market value of your car without paying exorbitant premiums.

IDV for a New Car:

For a new car, the IDV is calculated based on the ex-showroom price of the car minus depreciation. Usually, the depreciation for a new car is at 5 percent. So, the IDV would be 95 percent of the car's ex-showroom price.

Depreciation Rates:

Age of the vehicle

IDV Depreciation Percentage

Less than or equal to 6 months

5%

Greater than 6 months but less than or equal to 1 year

15%

Greater than 1 year but less than or equal to 2 years

20%

Greater than 2 years but less than or equal to 3 years

30%

Greater than 3 years but less than or equal to 4 years

40%

Greater than 4 years but less than or equal to 5 years

50%

IDV for an old car:

The IDV value for cars that are more than 5 years old are arrived through a mutual consensus between the insurance company and the policyholder. Keep in mind that, add-ons like zero depreciation might not be available for cars that are 5 years old.

Why Is IDV In Car Insurance Important?

As previously stated, IDV in car insurance is the amount you will receive if your vehicle is stolen or totaled. It is strongly advised to obtain an IDV that is close to the car's market value. Customers can choose between a 5 percent to a 10% reduction in IDV from insurers. A lower IDV would attract a lower premium.

Wrapping It Up

Purchasing auto insurance is a long-term commitment. Numerous insurance companies provide new policy as well as policy renewal plans at competitive market rates. Investors prefer to purchase a comprehensive car insurance policy with a low premium rate.

IDV (Insured Declared Value) and premium rates are important considerations when selecting a policy. As an insurance policyholder, it is critical to understand the intricacies of IDV in car insurance.

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