IDV in Car Insurance

Insured Declared Value (IDV) in a car insurance policy is value of the car. It determines the expenses that the car owners can claim from their insurer, after an unfortunate incident. Declaring the correct IDV amount will be beneficial for the owner of an insured car at the time of claim.

What is IDV in Car Insurance?

Insured Declared Value (IDV) or value of a car is the maximum sum assured that one would receive as a compensation for total loss or theft of the insured car. IDV is the current market price of the insured car.

So, in simple words, in case of theft or total loss of the insured car, an insurance company will make sure that at least the current market price of the vehicle is paid to the claimant.

How Is The IDV Calculated?

The insurance company would determine the value of your car by taking a look at the manufacturer’s listed selling price of the insured car’s model, age and brand. Then they would adjust this for depreciation. Remember, the registration and the insurance cost of the insured car are not included in the IDV.

The cost of any car accessories, which are not fitted by the manufacturer, is also calculated separately at an additional amount if insurance is required for these accessories.

The Motor Tariff Act has stipulated the below standard rates of depreciation:

AGE OF YOUR CARIDV Percentage
Up to 6 months95% (of Ex-Showroom price)
6 months to 1 year85%
1-2 years80%
2-3 years70%
3-4 years60%
4-5 years50%
5 years+To be negotiated

Now the car owners may wonder how the IDV would be calculated for a car aged over 5 years!

Well, there would be a discussion held by the insurance company. The IDV would be decided based on a mutual agreement between the insured car’s owner and the insurance company.

Here, instead of depreciation as the main factor, IDV is calculated based on the car’s condition as surveyed by the insurance surveyor, the model, the manufacturer(brand) and the availability of the car’s spare parts.

The IDV of the vehicle aged 5yrs & above depends on:

  • The Manufacturer(brand)
  • Car Model
  • Availability of the Spare Parts

Why Is It Important to Know the Insured Declared Value of the Car?

To start with the basics, there are 2 types of car insurance policies.

  • Third-party car insurance, which is mandatory as per the Motor Vehicles Act, 1988
  • Comprehensive car insurance policy

Third-Party Car Insurance

The third party covers any liability arising due to accidental damages, causing permanent injuries or death of the third-party. It also covers third-party property damages.

For a third-party insurance, the premium would be calculated on  basis of the car brand, car model and engine’s cubic capacity.

Comprehensive Car Insurance

Comprehensive car insurance covers the Own Damage (OD) as well as Third Party Liabilities. Any loss or damage to the insured car against natural, man-made calamities or any accidental damages are covered under the Own Damage category.

Under the comprehensive insurance policy, IDV comes into picture while calculating the Own Damage Cover of the car insurance premium. The OD premium is calculated exactly on the basis of the IDV of a car.  OD premium gets affected due to the IDV because depreciation keeps increasing.

So remember…

The older the car, higher would be the depreciation percentage

 

What If One Declares a Low IDV?

The premium would obviously be low if the IDV is declared lower than the actual amount. This is because the insured car’s OD premium is proportional to the value of the car.

One might save on the premium for the car insurance but would have to compensate for a lower claim amount, during a mishap. Which means, if the expenses due to accidental damage are higher, then the car owner will have to shell out from his own pocket. Simply because the expenses are higher than the declared IDV!

Points to remember:

  • Never declare an incorrect IDV amount. Get an IDV closer to the current market rate
  • The car’s IDV decreases as the car grows older
  • If a lower IDV has been declared, then the premiums would be lower along with a lower coverage

What Happens During Car Insurance Renewal?

Never simply agree to pay the premium blindly what the insurer quotes during the renewal. Check whether the IDV quoted justifies the premium charged by the insurer. Get in touch with your insurance company if you feel that an important aspect of coverage is not mentioned in your policy documents.

Remember, the premium for a comprehensive car insurance cover gets impacted by the IDV. So, it’s better not to understate or overstate the IDV, this would, in turn, be a hassle at the time of claim. You should ensure that next time when you renew your car insurance policy, see to it that the value, of your car, that you declare is in sync with your car’s age and model.

Bottom Line

Buying car insurance is actually a long-term investment. And therefore we urge the car owners to declare the IDV correctly for their car. ACKO reminds the car owners that the IDV of their cars should be according to the age and model of their cars to avoid any misunderstanding during a claim.

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