How to calculate IDV for your car?

We know that several motor insurance terms can be challenging to understand but are crucial to be familiar with, and one such term is IDV, which stands for Insured Declared Value

IDV (Insured Declared Value) is the maximum compensation amount provided by the insurer to the policyholder in case of a total loss or damage to the insured vehicle. It represents the current market value of the car and is the sum that the policyholder can claim for reimbursement for any damage to the vehicle. For comprehensive car insurance, the premium amount is directly linked to the IDV, meaning a higher IDV will result in a higher premium, typically ranging from 2% to 3% of the IDV’s total value

Popular Car Model Variants with Insured Declared Value (IDV)

Here are some examples of calculated IDV of the most popular car model variants. The premium rates are calculated on the basis of the city (Delhi) and year of registration (2019)

The IDV of the insured car is determined by the insurance company considering factors like brand, model, and age. It is calculated based on the selling price set by the manufacturer and the applied depreciation percentage. 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 component in the formula. The formula for calculating IDV will then include the components of the accessories, and the final IDV will be calculated as follows:

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

Car Depreciation Rate Table for IDV Calculation

The insured vehicle’s final value, determined after deducting depreciation, represents the maximum compensation that the policyholder can claim in the event of loss or theft. It is crucial for policyholders to be aware of their Insured Declared Value (IDV). Reducing the IDV to lower the premium cost should be avoided, as it can lead to lower claim payouts in case of a loss, resulting in financial losses for the policyholder. Maintaining an appropriate IDV ensures adequate coverage and better claim settlements

Impact of IDV in Car Insurance Policy

The Insured Declared Value (IDV) is crucial for calculating the own damage component of the car insurance premium. It applies to comprehensive car insurance policies, where own damage cover is an optional add-on. Policyholders who opt for own damage cover will receive compensation in case of damage or theft of the insured vehicle. The premium for this cover is usually 2% to 3% of the IDV, but it can vary based on factors like the vehicle’s age and cubic capacity. A higher IDV leads to a higher car insurance premium

During policy renewal, it’s essential to ensure that the premium charged is justifiable. If the insurer has not declared the IDV, the policyholder should immediately contact them to obtain the necessary details. The premium for a comprehensive car insurance policy significantly depends on the IDV. Lowering the IDV might save money initially, but it can lead to lower claim settlements later

It is advisable not to rush into lowering the IDV. While it may seem like a cost-saving measure at first, it can result in reduced compensation from the insurer at the time of claim settlement. It’s best to insure the vehicle at its full IDV to ensure adequate coverage in case of damage or loss. Always review the policy document to confirm that the agreed-upon values match the IDV discussed earlier

Points to Keep in Mind While Calculating IDV of a Car

1. IDV is the maximum compensation for total loss or theft: Insured Declared Value (IDV) is the approximate current market value of your car, as determined by the insurance company. In case of a total loss, such as a severe accident or theft, the IDV serves as the maximum amount the insurance company will pay you as compensation
2. Avoid lowering IDV just to reduce the premium; it may lead to lower claims: Some policyholders might consider lowering the IDV to reduce their car insurance premium. While this might save money initially, it can have adverse effects during claim settlements. A lower IDV means you’ll receive less compensation in case of an incident, leaving you with a financial burden to cover the difference
3. Verify IDV with the car manufacturer before accepting the insurer’s value: Insurance companies generally calculate IDV based on the car’s listed price from the manufacturer and its age. However, it’s essential to verify that the IDV offered by the insurer aligns with the actual market value or the value provided by the car manufacturer. If there’s a significant discrepancy, it’s best to discuss it with the insurer for a fair assessment
4. Ensure the premium aligns correctly with the car’s IDV: The premium you pay for your car insurance is directly linked to the IDV. A higher IDV will result in a higher premium, while a lower IDV will lead to a lower premium. It’s essential to ensure that the premium amount accurately reflects the coverage provided by the IDV. Paying attention to this helps you get the right balance between affordability and adequate coverage
5. Negotiate with the insurer for the desired IDV to ensure sufficient coverage: As a policyholder, you have the option to negotiate with the insurance company to set the desired IDV for your car. It’s essential to have an IDV that provides sufficient coverage to protect you from potential financial losses in case of accidents, theft, or other damages

Policyholders can set the car’s IDV online in some cases, but it’s important to keep in mind that different insurance companies might offer varying IDVs. This flexibility allows you to adjust the IDV during the renewal of your car insurance policy to ensure that it accurately reflects your car’s market value at that time

Factors that Help to Determine the IDV of a Car

The Insured Declared Value (IDV) of a car is influenced by various factors related to the vehicle, and some of these factors are explained below:

1. Type of Car: The type of car, such as hatchback, sedan, or SUV, affects the IDV. Generally, hatchback cars have a lower IDV compared to sedans or SUVs, as they are usually cheaper
2. Model of Car: Different car models within the same type can have varying IDVs. The model’s price is influenced by the brand and features it offers
3. Location of Purchase: The location where the car is purchased can impact its ex-showroom price. Cities may have slight differences in car prices, leading to variations in the IDV
4. Depreciation: Depreciation refers to the reduction in a car’s value over time due to age. As a car ages, its IDV decreases, and two cars of the same model can have different IDVs based on their age
5. Accessories: The depreciation cost of car accessories is also considered in IDV calculation. The age and working condition of these accessories can influence the overall IDV

These factors collectively contribute to the final determination of the IDV, which serves as the basis for calculating the premium and settling claims in the event of loss or damage to the insured vehicle