Monday, March 4, 2024

what is idv in car insurance

want to know about in car insurance what is IDV ? if yes then this article is for you.

After reading this article you will have complete information about IDV of a car insurance.

What does IDV mean in car insurance ?

IDV stands for Insured Declared Value that is the maximum sum insured to the policyholder or the value that will be provided upon total damage or theft of the insured vehicle.

Basically IDV is the current market value of the car or the amount of compensation provided by the insurance company to the policyholder upon complete damage or theft of the car.

It can be said that IDV is the remaining current value of that car, that is the difference of the current market value of the car and the depreciation along with the accessories (if any) value with depreciation.

However, the registration and insurance costs are excluded from the IDV calculation and the IDV of the accessories that are not factory fitted are calculated separately at extra cost, if insured.

How is IDV calculated for car insurance ?

IDV calculation is an important process for the policyholder so as to understand how much the compensation will be in case of any mishap. Insured Declared Value depends upon the current selling price of the car excluding the depreciation on its parts.

IDV = (company’s listed price of vehicle – Depreciation value) + (cost of accessories – depreciation cost of accessories)

The above mentioned formula is used to determine the Insured Declared Value for a vehicle with some accessories installed. In case the accessories are not installed we leave the accessories column and calculate the IDV directly.

For instance – A man purchased a car with the maximum value or IDV as 5 Lakhs, then the maximum amount that the insurer will recompense in the case of total loss or theft will be 5 lakhs.

It may be noted further that the compensation will be made available in the case of constructive total damage or theft of the car within the term of the policy.

IDV calculation – Some important points

You should consider these points while calculating the IDV for a car insurance, so as to choosing a perfect insurance plan for you,such as-

  • IDV calculation takes place by deducting the depreciation value from the company’s listed price. In any case, it is the maximum amount the insurer can reimburse according to the policy terms.
  • You should not inflate the IDV, as to save yourself from high premium and further disputed claim, also you should not lower your Insured Declared Value as it would result in a lower claim amount. So be true and correct.
  • There may be a low premium in case of correct valuation for the IDV of your car, if not then it will not end you up in disputed claim.
  • Always assess the IDV and check out yourself if it has been correctly evaluated.
  • You should research and always check your manufacturer’s statement before agreeing to any IDV.
  • It is always advisable to check whether you are getting adequate coverage and support as a lot of money is going to be put into it.
  • Always check if the premium is getting calculated according to IDV while renewing your car insurance.

IDV determining factors for a car insurance

There are some important factors that may affects the calculation for IDV or it can be said that these point help in considering the value of IDV-

  1. Ex-showroom price of the car –  The Insured Declared Value depends upon the ex-showroom price of the car as to determine the premium amount of the IDV which further results in the maximum compensation by the insurer.
  2. Make, model and manufacturer of the car- The make and model of the manufacturer helps determine the IDV as to how high-end and higher facility the car has, which will directly proportionate the cost of repair occurring after any mishap.
  3. Car registration details, along with the city of registration – The city where the car has been registered plays an important role in deciding the IDV, as the cost of repairing in Noida is much greater than in Dehradun.
  4. Ownership status of car – The IDV also depends upon the ownership as the vehicle is owned by the individual or a company.
  5. Cubic capacity of the car – The cubic capacity or CC is the power of the engine and it affects the insurance premium too.
  6. Age of the registration of the car – Age of the car or the date of registration of the car is a very important term in determining the IDV. The older the car is, the lower the premium amount.
  7. Standard depreciation – There is a depreciation schedule ( shown below), that affects the IDV of a car insurance.

How does IDV affect car insurance premiums?

The IDV of a car is directly proportional to the car insurance premium. This means that if the IDV will get reduced as the car gets old, then your car insurance premium will also also be reduced. 

Should we reduce or inflate our car’s IDV ? This question may arise in your mind and the answer is NO! We should never inflate or reduce our IDV value. Instead you should keep your IDV nearest to the current market value of the car.

Reducing your IDV will lower your premium, but will result in lower compensation in any mishap. Also to get higher compensation, one should not inflate the IDV value, since it will result in an disputed claim.

Depreciation calculator for IDV in a car insurance

The Insurance Regulatory and Development Authority of India, IRDAI has set a rate chart of depreciation calculation according to the age of vehicle, which helps in deciding the IDV of a car. The following table shows the rate of depreciation –

Age of the carDepreciation %
Less than 6 Months5%
Exceeding 6 months but less than 1 year15%
Exceeding 1 year but less than 2 year20%
Exceeding 2 year but less than 3 year30%
Exceeding 3 year but less than 4 year40%
Exceeding 4 year but less than 5 year50%

The IDV of a car exceeding 5 years old is decided by mutual negotiation by the insurer and the insured, taking into consideration the car dealers and surveyors’ review and opinion.

Advantage and disadvantages for high and low IDV

High / Low IDVAdvantageDisadvantage
High IDVHigher compensationHigher premium and disputed claims
Low IDVLesser premium amountLower compensation

Why should we care about IDV in a car insurance ?

The Insured Declared Value, IDV is a key aspect taken into consideration while purchasing a car insurance. Apart from the deciding of the premium amount, it also decides the maximum compensation amount in case of total loss or theft.

Thus it is always recommended to declare correct and approximate value according to the present market value of the car and never inflate or reduce the IDV of your car. However there are some more aspects determining the premium amount such as type of cover, add-ons cover, location, etc.

IDV has a dual feature that it controls the premium amount of the car insurance policy and at the same time it also controls the liability of the insurer upon unrecoverable loss at the time of claim settlement. 

Apart from these benefits, IDV of your car also has a key role when you decide to sell your car. Higher the IDV, higher the resale price and similarly lower the IDV, lower the resale price.

Conclusion

There are several factors that should be taken into consideration while purchasing a car insurance, such as customer support, offering of add-ons covers, claim settlement ratio, and many more but you should also consider correct and appropriate IDV with due care.

Read More

So this is the complete information about IDV of a car insurance. If you have any query, please comment below. You can read other posts related to insurance on this site. Thanks for reading.

*This site is not promoting any insurance policy. Please do proper research before purchasing any policy.

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