Insured Declared Value in Car Insurance
What is IDV in Car Insurance? IDV full form is Insured Declared Value. Car insurance is the long-term investment that one makes during a car purchase. For a comprehensive understanding, check out our guide on understanding coverage in car insurance. While this saves your skin from traffic violations, it does provide a cushion of finances against other forms of mishaps which may occur with any vehicle, including accidents, theft, even natural calamities like a cyclone or heavy snowfall, and earthquakes.
Your cost of car insurance involves several factors and buying or renewing your vehicle insurance policy requires caution. The IDV is one of the most crucial ingredients that affect your premium amount. Learn how you can save on your car insurance premiums even with a higher IDV. That has much influence on the premium amount and claims on your behalf.
Yet, most people are bewildered by what IDV in car insurance is and why it matters.
What is IDV in Car Insurance?
The full form of IDV is an ‘insured declared value’. That is, the IDV of your car turns out to be its prevailing market price. It is the sum the insurer would pay in case your car is stolen or declared a complete loss on account of the intensity of the damage caused. Alternatively, in simple words, it would serve as a cap on the sum covered under your car insurance policy.
Do remember that the total IDV is the maximum amount insured under your policy.
Then, after it leaves the manufacturing factory, this idv value forms a base for a car’s market value, which is highly dependent on the make, model, and age of the car. The IDV is mainly declared by the car owner at the time of buying or renewing the car insurance. Declaring the IDV is a very crucial aspect when buying or renewing insurance. If you’re looking for renewal tips, here’s a guide on renewing bike insurance online, as this value impacts not only your policy premiums but also the limits of your claims.
IDV in Car Insurance
The reason you must understand the IDV value in car insurance is as follows:
Compensation: When the theft or total loss of your car takes place, you are provided with an amount of compensation. This amount of compensation depends on the present market value of your vehicle. You calculate using the IDV value.
Risk Evaluation: The chances of a greater risk at the time of mishap increase with the increasing value of IDV. Consequently, there will be higher premiums also.
Settlement of Claim: Thus, at the time of claim settlement, the cost of repairing or replacing parts is calculated with respect to the IDV.
Total Loss Claims: The amount paid to you will be equal to the IDV if your car is totally damaged or stolen.
An inflated IDV means a hike in premiums, but a low IDV gets you scantily covered. Hence, you need to fix an IDV for your vehicle.
So far we have discussed, what is IDV in car insurance along with analysing IDV full form, what IDV value means and basic idea of IDV in insurance. Now we will move ahead with Idv Calculator.
How To Calculate Your Car Insurance IDV?
You could get an easy-to-compute IDV calculator that will help you determine the Insured Declared Value of your car in no time. Or else, you could calculate it manually using simple formulas. You determine the IDV by subtracting the depreciation value of vehicle parts from the manufacturer’s selling price of the car.
Here is a simple formula to calculate the IDV.
Insured Declared Value of Car = Manufacturer’s Listed Price – Depreciation Value
If accessories have been installed in the car, then there is some variation in the above calculation:
Car IDV = (Manufacturer’s Listed Price -Depreciation Value) + (Cost of Vehicle Accessories- Depreciation Value of Vehicle Accessories)
Depreciation Schedule for IDV Calculation
The Insurance Regulatory and Development Authority of India (IRDAI) has set standard depreciation rates for cars to assist with IDV calculations based on the vehicle’s age. Here’s a quick look at the depreciation percentages:
| Age of the Car | Percentage Depreciation for IDV Calculation |
| 6 months and below | 5% |
| Between 6 months and 1 year | 15% |
| Between 1 to 2 years | 20% |
| Between 2 to 3 years | 30% |
| Between 3 to 4 years | 40% |
| Between 4 to 5 years | 50% |
| More than 5 years | Mutually decided by insurer and owner |
For older cars, the insurer typically determines the IDV through a condition assessment and a survey report rather than relying solely on depreciation.
Important Factors for Calculating Car Insurance IDV
The following points are some which will go on to determine the IDV of a car:
- Registration details
- Registration place
- Ex showroom price of the car
- Registration date and type
- Car model and the make
- Car engine capacity
Things to Note While Computing IDV
When you compute the IDV, subtract the depreciation amount from the market value of the car, and consider the costs of fuel and maintenance.
Correctly valuing the IDV will ensure that the insurance charges are not too high and that the claims get settle fairly.
It would always be a good idea to go through the value of your car’s insurance and make some conclusion on that IDV with the manufacturer and confirm it with the insurer company.
Always ensure that the amount which you have calculated for the premium is the same as the IDV of your car,
Factors That Affect Your Car’s IDV
Age: Due to the aging of a car, its market value and hence IDV reduces. Thus, if the car is more aged, the age factor will decrease its value in contrast to a new model.
Car Type: The IDV varies for every car type, be it a sedan, hatchback, SUV, or MUV, as the features and prices vary in each type.
Registration Location: A car registered in some big city such as Mumbai or Delhi is highly prone to risks than others, and so will the IDV because of this factor too.
IRDAI Depreciation Rules : As the car ages, the depreciation rates as declared by IRDAI will rise.
Additional Add-ons: If add-ons were added post-purchase, these too attract depreciation and add up to the IDV.
As we move in depth with our analysis, let us look at what we have covered so far. We now have a good idea about what vehicle IDV means, what is the role of IDV in car insurance. We also analyzed the IDV Calculator and the basic idea of what is IDV in car insurance.
How Does Increasing Your Car’s IDV Work?
Increasing your car’s IDV also has its own pros and cons:
Pros:
A higher IDV automatically means a greater sum insured, and you will receive a larger payout in case of a claim.
In the event of a total loss, you will have to spend more from the increased IDV on the price to buy an entirely new car.
Cons:
With a high IDV, you will have to spend more on an insurance premium. In this regard, your car cover shall be more expensive.
In case you do not make any claims, then you are not realizing a value of higher IDV for your insured vehicle.
When to Opt for Low IDV on Your Covered Car?
Even though you must disclose the correct car value as its IDV most of the time, there may be situations where you require the IDV to be low. Consider the following circumstances under which you may want the IDV to be lower.
- When your car is old and its market value is not much.
- If you want to come within the insurance premium budget.
- When you feel that reduction in the sum insured would not make a big impact.
When to Choose a High IDV for the Insured Car?
There are occasions when a high IDV is desirable as well:
- If your car is luxury or costlier.
- If spare parts for your car are expensive or difficult to replace.
- If you can afford a higher premium for car insurance comfortably.
IDV and Claims
When you purchase a car insurance policy, you need to mention the IDV of your car. Though you do not use the IDV directly to calculate the claim, you must apply it in some cases, as mentioned below:
Theft: In case your car gets stolen, immediately file an FIR with the police. After which the police declared that vehicle as ‘non-traceable.’ You can raise an insurance claim for your automobile where you get the IDV as compensation.
Constructive Total Loss: If the vehicle sustains irreparable damage, you need to file a total damages claim. If the repair costs exceed the IDV, the insurer will term it a constructive total loss, and you will receive compensation for almost the value of the IDV.
Total Loss: If your car becomes irreparably damaged, the insurer will compensate you based on the IDV value.
Myths about IDV in car insurance and much more: busted
Myths: Insured people cannot alter the IDV fixed by the insurer.
Fact: You can alter the IDV based on similar models and your desired coverage.
Myth: The IDV of a car is equal to its resale price.
Fact: Resale value is subject to myriad factors like demand, condition, history, and so many others and has no bearing on the IDV.
How Does the IDV of a Car Influence its Insurance Premium
You need to declare the IDV when you purchase comprehensive car insurance. For third-party insurance, it is not really necessary to know what is IDV as third-party insurance does not cover damage to your vehicle.
Every year when renewing your car insurance, always declare the IDV correctly. While time is passing, your car’s market value and IDV reduce as well.
Errors Relating to Wrong Choice of IDV
Errors relating to wrong choice of IDV can result in unfavorable claims. Check out the best car insurance renewal options to avoid such errors.
During the period when you are renewing the car insurance, either online or offline, you must get many premium quotations. Of course, much of this depends on the IDV offered by a given insurer. As mentioned above, IDV directly relates to the final premium you pay for insurance. If you choose an offer that has a lesser IDV for your car, you may rejoice at first when it seems like a lower premium.
However, this will be short-lived and will give you a rude awakening when you file a claim for the total damage or loss of your car. You will likely feel disappointed when you realize the compensation is much lower than expected because the agreed-upon IDV is lower than the actual value of your vehicle.
The idea, of course, is that by maximizing the IDV in car insurance within reasonable limits, the group avoids future losses and dissatisfaction. You paid hard-earned money for both the car and its insurance-so you want every rupee spent there to give you maximum returns.
Conversely, inflation of IDV beyond reasonable expectations in hopes of receiving higher payout in case of theft or total loss is also unwise. The insurers carefully investigate the claims, and extreme over-declaration of IDV is likely to come into notice and possibly land you in trouble. If you agree on a fair IDV, the insurer can’t reject your claim when you need it, especially if everything else is in order.
The agreement might reflect the IDV itself if someone carjacks your vehicle or if repair costs exceed 75 percent of the IDV.
In brief, it is very important to check for the IDV value while you purchase or renew your car insurance policy. It helps you get the best possible value in terms of premiums and coverage. Additionally, you can check your car insurance status using a QR code for easier management.
When Is the IDV Payable?
Claims in respect of IDV of your car are relatively very few, but the correct IDV, whilst buying or renewing your car insurance is critical. This will ensure the premiums are in tune with the valuation of your car and would be able to receive adequate compensation in case of a claim. These are the major scenarios wherein the IDV of your car is payable:
Vehicle Theft: This is perhaps the most common claim for which the IDV is applicable. If someone steals your car and your insurance company considers it a total loss, they must pay you the prevailing market value, commonly known as the IDV, to cover your loss.
Total Loss of the Vehicle: When the cost of the repair exceeds the insured value, IDV is payable. It may be due to any accident or unexpected things like natural calamities or riots. In those cases, the insurance company will refund to the policyholder the IDV of the vehicle, which further assists the policyholder in buying a new vehicle after the dissipation of financial burden.
So far we have covered the points about what IDV value means, paying close attention to the IDV full form. This gave us an idea about what IDV is in car insurance.
Conclusion
In conclusion, it is critical for car insurance and financial security to know the IDV of the vehicle. Whatever you do, it’s going to either increase or decrease your car’s IDV. Meanwhile, IDV decides not only your premium but also your compensation in case of theft or total loss. All other factors plus one determining the make and model, age, and depreciation of your car. The place of registration and all other accessories of your car.
The correct IDV is essential to ensure the right compensation in case of theft or total loss of the vehicle. This is particularly important in the event of any car accident.
If you need any help in the complexities of car insurance or want to understand IDV better. Feel free to check it out at ApkaPolicyWala. They provide very expert guidance and resource material to help you make the right decision about your car insurance. This ensures you get the best cover for your car.