Do You Know How to Calculate IDV For Your Car?

On Apr 10, 2021

In India, motor insurance is mandatory for all types of vehicles. Car insurance policy acts as a reliable financial security in case of unfortunate events. In 2018 the car insurance market accounted for approximately 39.4%.

Even though the penetration of motor insurance is increasing, people are still unaware of IDV, Have you heard about Insured Declared Value (IDV)? Most of us would have but many do not know what exactly the term refers to and why it is important?.

IDV is considered one of the most important calculators under car insurance. IDV plays an important role in determining the premium of your car at the time of purchase and renewal. Knowing correct IDV is essential as it can affect the claim process.

IDV means the ideal premium that you should be paying for your car insurance depending on the market value of your car. It also refers to the claim amount your insurer will pay if your vehicle is damaged or stolen. For eg:- Your car’s market value is Rs 8 lakh. When you buy the policy the insurer will disburse Rs 8 lakh as insurance.

As we all know the car is a depreciating asset and it starts depreciating from the day of purchase. If the IDV is low, then your car premium will also be low.

The calculation of the IDV depends on factors such as:

Model of the car:-For example, the IDV of a BMW X7 would be higher than the IDV of a Volvo due to its higher cost and maintenance.
Age of the Car:- The higher the age of your car; the lower will be its IDV.
Depreciation Value:-The depreciation schedule shown in the table earlier impacts the IDV of your car.
Details of car registration (Location):-The IDV of a car registered and running in a metropolitan city like New Delhi will be open to more risks than the IDV of a car running in a small town in UP.
Other factors:- Private/Commercial Vehicles, Cubic capacity and the ex-showroom price of the vehicle.

How is IDV Calculated?

IDV= (Company’s Selling Price – the depreciation value) + (Cost of accessories – the depreciation value of those accessories )

IDV = Manufacturer’s registered price – depreciation value (In case of no accessories)

Note:-

While calculating IDV; The registration and insurance cost are excluded.

The Depreciation Schedule to calculate the IDV:

Age of Vehicle Depreciation Percentage

6 months or below 5%

Exceed 6 months but less than 1 year 15%

Exceed 1 year but less than 2 years 20%

Exceed 2 years but less than 3 years 30%

Exceed 3 years but less than 4 years 40%

Exceed 4 years but less than 5 years 50%

For vehicles that are more than 5 years old, the IDV is determined mutually between the policyholder and the insurance provider and sometimes it is decided by authorised surveyors, the cost of which is borne by the insured.

Things to consider while carefully assessing the IDV of your car

IDV correct value may cost you less premium
In order to get the lowest premium do not reduce the IDV as it would mean a lesser claim amount.
Check IDV from the manufacturer before agreeing to the value set by your car insurance provider
Yes, you can also negotiate to get the desired IDV.
Remember your car’s IDV will differ from one insurer to another.

How Does IDV Affect Car Insurance Premium?

The IDV of your car will directly affect your Car insurance premium. Higher IDV, the Higher premium will be charged to you. The IDV of your car will reduce with its age, the premium amount will also reduce.

The best thing is to get an IDV closest to the market value of your car without paying enormous amounts on premium.

Why is IDV crucial?

Higher IDV can help you to get the maximum amount during the claim
If you want to sell your car, higher IDV will automatically fetch you a higher selling price.

Compare the great deals from insurance providers and then choose the best possible option.

Overall, buying car insurance is a long-term investment to secure compensation in the event of loss or theft of the vehicle.

Hence, it is essential to evaluate all terms and conditions, while assessing IDV as set by the company. The ultimate motto is to engage with a trusted insurer, such as Godigit and secure an IDV, which is a true vehicle’s value.

Also, do you know about Third Party Car Insurance? also called third party liability insurance? As per Motor Vehicles Act in India, Third-Party Car Insurance is mandatory without which you will be liable for a heavy fine. Third-Party Car Insurance helps to cover any liability which is caused to any third-party vehicle; in this policy, your own vehicle damages are not covered.

If you are planning to pick a health insurance plan, here some tips to help you choose the best plan with good coverage.