Facts About Setting Correct IDV During Car Insurance Renewal

Published On 11 Jan 2020 By InsuranceDekho

Insured's Declared Value (IDV) is the current market value of your car. It is your responsibility to calculate IDV correctly while car insurance renewal.

Insured Declared Value (IDV) in Car Insurance - People these days have become fully digitised and they prefer to get their work done via online means. This holds true in renewing one’s car insurance policy as well. Previously it was quite a hectic job to visit the office of the insurance company every time you had to renew the insurance policy of your vehicle. Nowadays, insurance companies have come up with online portals, thus allowing car owners to carry out the renewal process online, by following just a few simple steps.

Online car insurance renewal has another benefit as well. You can fetch and compare insurance plans for various companies. This helps you to make an informed decision. While people do compare various factors like premium amount, exclusions, inclusions, etc., they often undermine the importance of setting their vehicle’s IDV correctly. It is your responsibility to set your IDV accurately to avoid any crises during an emergency situation.

What is IDV in Car Insurance

IDV is short for the ‘Insured Declared Value’. It is one of the most significant factors that help to determine the car insurance premium cover of a policyholder. In simple words, IDV is the current market value of your car.

The value of your car is subject to changes and it usually starts depreciating the moment you begin to use your vehicle. No matter how careful you might be with your car and how many security or safety devices you have installed, your car is bound to receive certain wear and tear. This reduces your car’s market value and hence its IDV. The IDV is, therefore, calculated by reducing the depreciation.

Insured Declared Value (IDV): How it is Calculated for Car

As mentioned earlier, the depreciation of your car is a major factor that comes into play while you are setting up your car’s IDV. So the formula for estimating your car’s IDV is as follows:

IDV = (The Selling Price of the Car listed by your Manufacturer - Depreciation) + (Accessories not included in the listed selling price of your car - Depreciation)

The total IDV calculated excludes all registration costs and other insurance charges.

How to Set a Correct Insured Declared Value (IDV)

To ensure that you set the most suitable IDV for your car, here is a step-by-step guide for you -

Step 1: Before setting up your car’s IDV, you must make sure to compare several insurance companies to check for the best IDV.

Step 2: In case you are looking to renew your car insurance policy online, you will receive a quote along with your IDV. You can even calculate your own quote after setting a suitable IDV yourself with the help of an IDV calculator provided by many web portals of car insurance companies. In either case, you have the freedom of adjusting the IDV within a certain range limit.

Step 3: It is up to you to decide whether you will set a lower or a higher IDV. If you set a lower one, your car insurance premium will definitely be less. However, the total reimbursement amount that you will receive in an event of a loss or damage will be comparatively lower. If you set a higher IDV for your car, then you will get a higher compensation amount in incidents of a total loss or damages caused to your car, even though you have to pay more for your insurance premium. So setting a higher IDV is beneficial in the long-run.

Step 4: Estimate your car’s IDV according to the formula stated above to follow a more balanced approach. You need not go for a precise number as going for an approximate rounded-up figure would do.

Step 5: In case you find it difficult to set a suitable IDV for your car, call up your insurance company to discuss several factors to guide you well.

Why Setting Up Correct Insured Declared Value (IDV) is Important?

Premium: A correct IDV will cost you lesser insurance premium amounts. If you set a lower IDV, your premium amounts will be lower and vice versa. As mentioned earlier, if you set a higher IDV, you will get higher compensation amounts in emergency situations like a car damage or loss, thus proving you with adequate financial support.

Compensation: You will get good financial backup in emergency situations, like car theft, a total loss of the vehicle, or in the situation if your car has received damages that are beyond repair. In such situations, your car insurance company will reimburse the amount equivalent to the IDV of your car.

Factors to Consider While Setting Your Insured Declared Value (IDV)

Manufacturer’s price: The listed selling price of your car as declared by your manufacturer is largely taken into consideration while setting your car’s IDV.

Depreciation: The value of your car is calculated by deducting the depreciation value of the vehicle from the actual market price. Below is a table on the percentage of depreciation while calculating the IDV of your vehicle -

Age of the Vehicle

% Depreciation for adjusting IDV

Less than 6 months

5%

More than 6 months but less than 1 year

15%

More than 1 year but less than 2 years

20%

More than 2 years but less than 3 years

30%

More than 3 years but less than 4 years

40%

More than 4 years but less than 5 years

50%

Conclusion

It’s recommended that you set the correct IDV for your car and renew your car insurance policy well on time. Today, with numerous easy-to-access web portals, you can easily renew your insurance policy online. You will not require any paperwork as you can carry on with simple documentation procedures by uploading soft copies of your necessary documents, anytime from any device.

Read informative Car Insurance Articles at InsuranceDekho.

Disclaimer: This article is issued in general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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