What Is IDV In Car Insurance? Why Is It Important?
Updated On Oct 15, 2023
Read this article to understand what IDV is and its importance with respect to car insurance.
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IDV is an abbreviation of Insured Declared Value. This is a concept that is used to determine the present market value of your car. The insured declared value is calculated by subtracting the depreciation cost from the selling price that is declared by the manufacturer. This article will explain what IDV is with respect to car insurance and its importance.
What Is IDV In Car Insurance?
IDV (Insured Declared Value) is the total or maximum claim amount that an insurer will pay a policyholder for the car in case of extensive damage that is beyond repair. The amount that the insurance company will pay for your insurance claim depends on multiple factors among which the current market value of the car plays a major role.
The value of your car begins to depreciate from the minute you purchase it. If the IDV of your car is low, the cost of your car insurance premium will also be low and so will the claim amount. To calculate IDV, insurance companies consider a few details of the car such as its date of purchase and model, its accessories and number of times it has been given to service, etc.
Your insurance premium amount will decrease with the age of your car. The older the car is, the lesser the cost of the premium. This is mainly because there is wear and tear of auto parts as you use it for a period of time. This wear and tear will decrease the efficiency of the system thus resulting in depreciation. The depreciation will decrease the current market value of the car which in turn reduces the amount that you receive for your claim. Therefore, your premium too decreases.
Major Factors That Help In Determining The IDV
The following are a few factors that act as determiners in calculating the Insured Declared Value of your car-
The Age Of The Car
The older the car is, the lesser the IDV is because of the increasing depreciation. This is mainly because the depreciated value of the car’s auto parts will bring down the IDV.
Make and Model Of The Car
The make and model of the car will impact the IDV in a huge way depending on the maintenance cost and repairing costs. Therefore, owning an expensive car will also sum up to a higher premium than an economy class car.
City Of Registration
A car registered and running in urban areas involves high risk and will have lower IDV than a car that is in a suburban area. This is mainly because cars in urban areas are more prone to risks of collision or theft.
Importance Of IDV In Car Insurance
Insured Declared Value plays a major role in determining the premium of your car insurance both at the time of purchase and renewal. It is also a major factor that is considered while deciding the insurance claim amount in case of extensive damage to your car that is beyond repair. The following are the situations that take IDV into consideration-
While Purchasing Or Renewing Car Insurance Policy
IDV of your car will have a direct affect on your car insurance premium while purchasing or while renewing your car insurance policy. High IDV will imply that you will be paying a higher insurance premium amount. On the other hand, a low IDV will cost you a lesser premium amount.
While Getting Your Car Insurance Claim Amount
IDV plays a major role in deciding the amount that you receive when you claim your car insurance in the case of extensive damage which is unrepairable. The insurance company will pay you a higher amount if the IDV of your car is high. On the contrary, you will be subjected to receive a lower amount if your IDV is low.
The Insured Declared Value makes a major impact on both your car insurance premium as well as the claim amount. Make sure you calculate the IDV for your car correctly in order to be aware of the processes that involve its use. Making aware decisions is the key to owning a car insurance policy that is affordable yet offers maximum coverage. Drive safe!
Disclaimer: This article is issued in the 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.