IDV, or Insured Declared Value, is an important factor in determining the premium you will pay for your car insurance. It is important to understand what is IDV in car insurance and how it influences your car insurance premium. In this blog, we will discuss all the pertinent information about IDV in car insurance and other related information that you should know while buying a comprehensive car insurance.
What is IDV in Car Insurance?
IDV in car insurance represents the current market value of your car. In other words, it is the maximum amount that your insurance company will pay you if your car is stolen or damaged beyond repair. You will need to choose an IDV for your car when you buy car insurance. It is important to choose a realistic IDV that reflects the current market value of your car. If you choose an IDV that is too high, you will pay a higher premium than necessary. If you choose an IDV that is too low, you may not get enough compensation if your car is stolen or damaged.
Your insurance company will calculate the premium based on your chosen IDV. Generally, the higher the IDV, the higher the premium. It is important to note that the IDV of your car will decrease over time as it ages and depreciates. It means that the premium you pay for your car insurance will also decrease over time.
How to Calculate IDV for Car Insurance?
IDV is the current market value of your car minus the depreciation. When buying or renewing the policy, you fix it and the insurer, affecting your premium amount.
But how do you calculate IDV for your car? Well, some online tools can help you with that. But if you want to understand the logic behind it, here is the formula:
IDV = (Manufacturer’s listed price – Depreciation) + (Cost of accessories – Depreciation of accessories)
The manufacturer’s listed price is the original price of your car model, brand and variant when you bought it. Depreciation is the reduction in the value of your car over time due to wear and tear, age and usage. The cost of accessories is the extra amount you spend on adding features or parts to your car that were not factory-fitted. The depreciation of accessories is also based on the age and condition of the accessories.
The depreciation rate depends on the age of your car and is fixed by the Motor Tariff Act. Here is a table that shows the standard rate of depreciation for cars in different age groups:
Age of your Car Depreciation for IDV (%)
Up to 6 months 5%
6 months to 1 year 15%
1 – 2 years 20%
2 – 3 years 30%
3 – 4 years 40%
4 – 5 years 50%
5+ years To be negotiated
For example, if you bought a car for Rs 10 lakhs two years ago and added accessories worth Rs. 50,000, then your IDV would be:
IDV = (10,00,000 – 20% of 10,00,000) + (50,000 – 20% of 50,000) IDV = (8,00,000) + (40,000) = 8,40,000
If your car is damaged or stolen within the policy term, your insurer will pay you Rs. 8,40,000 as compensation.
Points to Remember While Calculating IDV for Car Insurance
Listed below are the primary factors to consider when calculating IDV for car insurance:
- Manufacturer’s listed price: The first factor determining the IDV of your car is the manufacturer’s listed price, which is the original selling price of your car model, brand and variant. It is the base value from which depreciation is deducted to arrive at the IDV.
- Age of the car: The age of your car is one of the most important factors that affect the IDV. As the car ages, its value depreciates, and it is essential to account for this while calculating the IDV. The older your car is, the lower its IDV will be.
- Make and model of the car: The make and model of the car also play a crucial role in determining the IDV. Cars from premium brands tend to have a higher IDV than those from budget brands.
- Modifications to the car: If you have modified your car with additional accessories or features, it is important to include these while calculating the IDV. The cost of these modifications can significantly increase the value of your car, and thus your IDV.
- Condition of the car: The condition of your car is another important factor that affects the IDV. If your car is well-maintained and in excellent condition, it will have a higher IDV than a poorly maintained car in bad condition. Ensuring that your car is well-maintained is important to get the right IDV.
What is the Importance of IDV for Car Insurance?
There are several reasons why IDV is important for car insurance.
- Determines your premium: It plays a crucial role in determining the premium you will pay for your car insurance. The higher the IDV, the higher the premium. The insurance company will have to pay more if your car is stolen or damaged beyond repair.
- Affects your claim amount: If you claim your car insurance, the insurance company will use the IDV to calculate the amount they will pay you. If the IDV is low, you’ll get a lower claim amount. So, it is important to declare the correct IDV when buying car insurance.
- Reflects your car’s value: It reflects its current market value. If the IDV is too high, you will pay a higher premium. On the other hand, if the IDV is too low, you may not get be adequately covered.
- Helps you choose the right coverage: It can help you choose the right coverage for your car insurance. If the IDV is high, you may opt for comprehensive protection coverage. If the IDV is low, you may choose basic coverage with limited protection.
IDV is an important factor you should consider when buying car insurance. It determines your premium, affects your claim amount, reflects your car’s value, and helps you choose the right coverage. So, make sure you declare the correct IDV when buying car insurance to avoid any hassles later on. Note that IDV is a concept applicable to standalone own damage cover or a comprehensive car insurance coverage, and not for third-party liability coverage.
The post <strong>What is the Meaning of IDV in Car Insurance?</strong> first appeared on YouthSpeaks - Latest News About Business, Technology and More..