Insured Declared Value (IDV) In Car Insurance

Purchasing a car insurance policy is a long term investment. There is an ample number of insurance companies offering new policy as well as policy renewal plans at a competitive market rate. The investors prefer taking comprehensive car insurance policy at an affordable premium rate. An important thing to keep in mind before choosing a policy is IDV (Insured Declared Value) along with premium rates. As an insurance policyholder, it becomes important to know the nitty-grittiest of IDV.

What is Insured Declared Value (IDV) In Car Insurance?

IDV (Insured Declared Value) is the maximum sum assured by the insurer that a policyholder is supposed to receive in terms of compensation at the event of total damage or loss occurred to the insured vehicle. It is referred to as the current market value of the insured’s car. In other words, IDV is the amount that a policyholder can claim for reimbursement against the damage caused to the insured vehicle.

When a policyholder opts for a comprehensive car insurance policy, IDV is taken into account. The amount of premium payable by the policyholder is directly proportional to IDV. More the IDV more will be the amount of premium although a premium is usually 2% to 3% of the total value of IDV.

IDV Calculator

IDV Calculation - The insurance company determines the current value of the insured’s car by taking a few factors into consideration such as brand, model and age of the car. IDV is determined on the basis of the selling price fixed by the manufacturer and the percentage of depreciation charged on it. The simple formula to calculate IDV is:

IDV = Manufacturer’s registered price – depreciation

The cost of accessories that were not fitted by the manufacturer at the time of delivery will be calculated as an additional. In formula will also include components of the accessories and then the IDV will be calculated as:

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

Rate of depreciation based on the age of the vehicle:

Age of Car

Rate of Depreciation Without Zero Depreciation cover

Under 6 months

Nil

6 months to 1 year

5%

1-2 years

10%

2-3 years

15%

3-4 years

25%

4-5 years

35%

5-10 years

40%

Above 10 years

50%

The final value of the insured vehicle found after deducting depreciation is the maximum compensation that the policyholder can claim at the time of loss or theft. It is very important to know about the value of your IDV. Never reduce your IDV for paying less premium; otherwise, you will end up getting less claim and incur a loss.

Impact of IDV in Car Insurance Policy

Insured Declared Value plays a very crucial part when it comes to calculating the own damage components of the car insurance premium. Though own damage cover is optional and only be available if the policyholder is opting for a comprehensive car insurance policy. The policyholder may or may not opt for this cover, but the own damage premium will be estimated according to IDV. People who will opt for their own damage cover will get compensation in case of damage or theft of the insured vehicle. The premium for own damage cover will be 2% to 3% of the IDV of the insured vehicle. Though it may vary based on certain factors such as the age and cubic capacity of the vehicle. Hence, higher will be the IDV, higher will be your car insurance premium.

At the time of renewal of the car insurance policy, the premium charged on the policyholder must be justifiable. Therefore if the insurer has not declared the IDV you should immediately contact the insurer and get the necessary details. It is important to note that the premium of a comprehensive car insurance policy is has a severe impact on the IDV. The ignorance today might turn problematic at the time of claim settlement.

Therefore, one must not be in a hurry to lower down their IDV. It is true that initially, you might end up saving some money by cutting down on the value of the premium, but at the end, you might lose a big chunk of compensation borne by the insurer at the time of claim settlement. It is always recommended to get your insurance at the full amount of IDV because this is what you are going to get at the time of damage or loss. Make sure to check the policy document after they arrive to make sure the values are the same as discussed earlier.

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Car Insurance Insured Declared Value FAQs

  • How Does IDV Affect my Car Insurance Premium?

    The premium amount for car insurance is dependent upon the Insured Declared Value of your car. This is due to the fact that Insured Declared Value is the main part of the comprehensive car insurance plan. At the time of purchasing a third party liability plan you are not required to declare the Insured Declared Value, as in this insurance policy, your own vehicle does not get insured against damages as it is for other people.

      At the time of purchasing the insurance policy in case you adjust the offered IDV amount, you will notice that the premium amount also increases or decreases. Therefore, it is important for you to know the correct insured Declared Value of your car prior to purchasing the insurance plan.

  • Why do some insurance companies keep the Insured Declared value of the car low?

    Some insurance companies prefer to keep the Insured Declared Value of their car low as by reducing it, the insurance premium decreases accordingly. The policyholder is required to select the correct Insured Declared Value which is equal to the car’s market value.

  • How to select the best Insured Declared Value for my car insurance plan?

    Highlighted below are some ways to know how to choose the Insured Declared Value for your car insurance:

    • Make sure that the IDV is your car’s market value as insurance providers will compensate based upon the kind of loss faced and not according to the entire IDV.
    • In case you have added accessories in your vehicle, then it is recommended to get your accessories insured as well. Also, doing this would increase your premium amount and IDV accordingly.
    • Ensure that you are not selecting a car insurance policy based upon a lower premium as a low premium amount could be because of the lower insured Declared Value.
  • What are the benefits of higher Insured Declared Value in Car Insurance?

    Getting your car insured with a correct Insured Declared Value will help you in saving money. However, given below are some of the benefits in case you select a higher sum insured value in car insurance. They are:

    • Lower Risk: Although, a lower Insured Declared Value would result in a lower premium rate, however, it also means that at the time of raising a claim, you might not receive market value of the car when it gets completely damaged because of natural calamities, fire, etc or gets completely damaged.
    • Security and Peace of Mind: At the time of raising a claim for damages faced by your car, an increase in Insured Declared Value will provide you with sufficient funding to repair or replace any component of your car.
  • What is the difference between Insured Declared Value and No Claim Bonus?

    Insured Declared Value or IDV is the total claim amount that the insurance company will pay to its policyholder in the event of total damage to the car or if it gets stolen. While, on the other hand, No Claim Bonus is the discount that the policyholder would receive during the policy renewal in case they have not raised any claim during the previous policy tenure.

  • How Can I Calculate My Car’s IDV?

    The Insured Declared Value (IDV) is also the maximum compensation that your insurance provider will give you in case of a mishap. It is primarily dependent on the make, model, variant and year of registration of your car. The IDV is calculated by deducting the depreciation rate from the manufacturer’s selling price. However, the easiest way to calculate the amount is to simply use our free premium calculator.

  • Why are Car Insurance Premiums Different for the same IDV?

    There are a few reasons why this could happen:

    • There is a discount offered by the company for attracting customers.
    • The policyholder’s accumulated NCB has been deducted from the premium.
    • The policyholder has chosen add-on covers.
    • The policyholder has opted for a voluntary deductible.
  • Will the IDV Value be Paid in Full in Case of Theft of My Car?

    Yes, in case of theft the insurance provider will compensate the full IDV amount for your car. However, keep in mind the IDV is not the same as the selling price of the car, it is affected by the depreciation rate. Having a return to invoice cover in such cases makes a significant difference as it covers the difference between the IDV and the selling price of the car.

  • Does the IDV of the Car Decrease When I File for Insurance Claim?

    There is no limit to the number of times you can file for a car insurance claim in a year. However, the IDV is the maximum amount of compensation the insurance provider will give you within that year. The multiple claims do not reduce the IDV as it remains fixed for a year. However, multiple claims can lead to higher premium rates when renewing the insurance and the number of claims you can make with a zero depreciation cover is also limited, usually to two times in a year.

  • What Happens if the Cost of Repair is Higher than the IDV of the Car?

    In such cases the policyholder receives the entire IDV amount, however, any costs beyond the IDV will not be compensated. In most such cases the car is usually certified as a case of a total loss, in that the repairs cost as much or almost as much as the current market value of the car. Hence, in such cases, it becomes more practical to scrap the car than repair it.

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#Applicable on non-inspection cases i.e. existing policy has not expired or when buying a policy for a new vehicle.