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IDV For Car Insurance

When it finally happens to renew your car insurance, you’ll receive numerous offers from various insurers. Some policyholders begin looking for and comparing premiums from several insurers. There’s nothing wrong with that, but it should be conducted with prudence. Beware that while insurers may offer a lower price, the car’s insured declared value (IDV) may also be substantially reduced.

The IDV (Insured Declared Value) is the highest sum guaranteed by the insurer that a policyholder is entitled to in regards to compensation in case the insured car is wrecked or lost. The current market value of the insured’s vehicle is referred to as this. In layman’s language, the IDV is the maximum amount for which a policyholder can be reimbursed for damage to the insured vehicle.

Why Car IDV Is Important?

There are two major reasons why your car’s IDV is significant to car owners. First and foremost, it is the maximum amount of compensation you will receive in the event of theft or irreparable damage to your vehicle. Second, your car’s IDV has a direct impact on the cost of your insurance policy. A higher IDV equals a larger premium and the other way around.

With this insight, many car owners try limiting their IDV to save money on their insurance premiums. However, keep in mind that a lower IDV may result in a reduced payout in the event of theft or total loss of your car. This can be potentially disheartening. When purchasing or renewing a car insurance policy, it is critical to employ an IDV calculator to determine the exact IDV for your vehicle.

How To Calculate IDV For Your Car?

IDV is computed by subtracting depreciation on the vehicle’s parts from the manufacturer’s determined selling price in car insurance. The following is the formula for calculating the real Insured declared value:

For Additional Accessories:

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

For No Added Accessories:

Your car’s IDV = car’s ex-showroom price – depreciation.

Let’s take an example to understand to get the IDV value:

Mr Akash who lives in Delhi had purchased a Hyundai Creta in March 2018. The variant of his car is 1.6 SX Plus at Petrol.

Then, the Indicative Insured Declared Value is INR 782222.

Insured’s Declared Value (IDV) as per India Motor Tariff 2002; GR- 8:

For this tariff, the insured’s Declared Value (IDV) of the vehicle will be deemed to be the ‘SUM INSURED,’ and it will be established at the start of each policy period for each insured vehicle.

Schedule of depreciation for arriving at IDV:

Age of Your CarPercentage of depreciation for fixing IDV
Not exceeding 6 months5%
Greater than 6 months but less than 1 year15%
Greater than 1 year but less than 2 years20%
Greater than 2 years but less than 3 years30%
Greater than 3 years but less than 4 years40%
Greater than 4 years less than exceeding 5 years50%

Important Note: The IDV of vehicles older than 5 years and obsolete models of vehicles (i.e., models that the manufacturers have stopped producing) is decided based on an agreement between the insurer and the insured.

Important Factors That Could Significantly Affect Vehicle IDV

The declared value of your car is determined by many parameters. The following is a list of elements that can have a major impact on your vehicle’s IDV.

  1. Don’t Overlook Your Car Type: The type of car, such as a hatchback, sedan, or SUV, has a significant impact on the IDV value. The worth of a car is determined by its kind, with hatchback cars being less expensive than sedans or SUVs. As a result, the IDV may differ depending on the type of vehicle.
  1. Prioritize the Age of Car and Depreciation: As soon as you drive a car out of the showroom, it depreciates. Cars are one of the few popular purchases among consumers that depreciate rapidly year after year! This has a significant impact on IDV, and the rates are also mentioned above.
  1. City Registration Details: Your registration certificate contains information about your vehicle’s registration. In addition, the city in which your car is registered affects the insured declared value. In a metro city, your car’s IDV may be lower than in a tier-II city.
  1. A number of Accessories in the Car: IDV detects changes to a limit depending on additional accessories in a car. The premiums will not be the same for two identical model cars because the accessories may differ.
  1. Make & Model of Your Car: The manufacturer and model of your car also play a factor in determining the IDV. This is because different car brands, even if they are the same sort of vehicle, have distinct values (i.e., hatchback, sedan, etc.).

Points to Remember When Calculating the Insured Declared Value

One of the most important elements that determine the cost of car insurance is the insured declared value. Here are some things to keep in mind when calculating the IDV.

  1. Don’t Exaggerate: Make sure you do not minimize the IDV to cut the premium. In the event of any losses, this will lower your claim amount.
  1. Do Not Overstate: Overstating the IDV will raise your premium, and you will only get compensated for the type of loss, not the total IDV.
  1. Avoid Using Inexact Values: Do not supply an incorrect IDV, since this could result in your claim being denied.

When Is IDV Paid?

Claims involving your vehicle’s IDV are extremely uncommon. However, while purchasing or renewing an automobile insurance coverage, it is still critical to select the appropriate IDV. This will ensure that your insurance premiums are in line with the value of your vehicle. But, more crucially, it ensures that if your IDV is used to calculate a claim amount, you will be compensated fairly and satisfactorily. The IDV of your car is payable in the following situations:

  1. Theft of the Car: This is one of the most prevalent claims that requires payment of the car’s IDV. As theft is considered a total loss, the insurance company is required to pay the insured the current market value (IDV). This payment will assist in mitigating the financial impact of the stolen automobile.
  1. Complete loss of the Car: When the repair cost exceeds the insured value of the vehicle, the IDV of the car is payable. An accident, a natural tragedy such as an earthquake, or a man-made calamity such as rioting could all cause such destruction. The policyholder will be given the vehicle’s IDV by the insurance company. This will lower his or her financial commitment to the acquisition of a new automobile.

Frequently Asked Questions

Here’s the list of the frequently asked questions related to the IDV for car insurance:

Yes, you can choose between a return to invoice option and a new vehicle replacement option. This will cover the difference in price between the IDV and your new car’s on-road price.

The IDV of a vehicle is determined by the vehicle’s type, market value, age and rate of depreciation, as well as accessories. It makes no difference whether the car is commercial or personal.

When you opt for a higher IDV, then there are the scenarios that would happen:

  • Your policy’s covered amount will rise.
  • In the event of a total loss, the higher sum insured can be highly beneficial.
  • However, your auto insurance policy’s premium would rise as well.
People are sometimes duped into paying low rates by declaring a low IDV. However, while your premium may be lower, your compensation during claims will be lower as well, and this may not be enough to cover your car. So, instead of aiming for a greater or lower IDV, it is recommended to aim for the right IDV.

If you’ve already begun driving your automobile, that is, if you’ve driven it out of the showroom, the invoice value of your car will be the invoice value less the minimal depreciation.