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Home / Car Insurance / Insured Declared Value (IDV) In Car Insurance
What is IDV in Car Insurance?
IDV refers to the maximum or the highest amount you shall receive from the insurer if the insured car is damaged beyond repair. IDV full form stands for Insured Declared Value. Your insurer shall offer you the IDV of your car if it is damaged so severely (total loss) that it cannot be repaired. Note that the IDV is declared by the owner of the car while insuring it. It directly impacts the payable premium — the higher the IDV, the higher the premium.
How to Calculate IDV for Car Insurance
When you buy a new car, the IDV is based on the manufacturer’s selling price, taking depreciation into account. Below is the formula to calculate IDV in insurance. Alternatively, you can use our IDV calculator for car to get the IDV for your vehicle.
With Accessories
IDV = (Manufacturer’s Selling Price – Depreciation Cost) + (Accessories Cost – Depreciation of These Accessories).
Without Accessories
If you have not added any accessories to your car, then the formula is IDV = Manufacturer’s Selling Price – Depreciation Cost.
Standard Car Depreciation Rate for IDV Calculation
The following table provides the standard car depreciation rate for IDV calculation.
AGE OF YOUR CAR | DEPRECIATION FOR IDV |
|---|---|
Up to 6 months | 5% |
6 months to 1 year | 15% |
1 to 2 years | 20% |
2 to 3 years | 30% |
3 to 4 years | 40% |
4 to 5 years | 50% |
5 years+ | To be negotiated |
Points to Keep in Mind While Calculating IDV of a Car
IDV full form in insurance is Insured Declared Value, and it is one of the primary factors which influences the car insurance premium amount. Here are some points to remember while calculating it in car insurance.
Do Not Understate
Do not reduce the IDV so that the premium is lower. It will reduce your claim amount in case of any losses incurred.
Do Not Overstate
Do not overstate the IDV since it will increase the premium, and ACKO will compensate you based on the type of loss and not the entire IDV.
Avoid Inaccurate Value
Do not provide an inaccurate IDV, as it could lead to a possible decline of your claim.
Popular Car Models and variants with IDV (Insured Declared Value)
Here’s a table that lists the popular car models with their IDV. Note that the IDV is for brand-new car models, and the IDV in insurance is region-specific (Bangalore).
Model | Variant | IDV |
|---|---|---|
Tata Punch | Accomplished (Petrol) | Rs. 6.92 lakhs |
Maruti Suzuki Swift | ZXI (Petrol) | Rs. 5.55 lakhs |
Tata Nexon | XZ Plus (Petrol) | Rs. 8.12 lakhs |
Kia Seltos | 1.5 HTX (Petrol) | Rs. 11.39 lakhs |
Hyundai Creta | SX IVT (Petrol) | Rs. 14.5 lakhs |
Maruti Suzuki Brezza | VXI | Rs. 8.99 lakhs |
Factors that Help to Determine the IDV of a Car
The IDV value is dependent on a few factors related to your car. Here is a list of those factors.
Age of the Car
One of the significant factors that determine the IDV is the age of the car. The older the vehicle is, the lower its market value. Hence, the IDV for an older car will be lower compared to a brand-new vehicle.
Type of Car
Several types of cars are available in the market, including hatchbacks, sedans, SUVs (Sports Utility Vehicles) and MUVs (Multi-Utility Vehicles). The value of a car depends upon its type. A hatchback car is usually cheaper compared to sedans or SUVs. Thus, the IDV would vary accordingly.
Car model
Various car models of the same type, say a sedan, can have different IDVs. It depends upon the brand i.e. manufacturer, and the features offered on a certain model of car.
Location of purchase
There is a slight difference in the cost of a car depending upon the location of purchase. For example, the ex-showroom price of the same model can be different in Mumbai and Delhi.
Depreciation
Depreciation is a reduction in the monetary value of a car due to age. The older the car, the more depreciation. For example, two cars of the same model will have different IDVs because they were manufactured in different years.
Accessories
Depreciation on accessories is also calculated while determining the amount of IDV. Thus, its value will change depending on the age and working condition of additional accessories.
Impact of IDV on Car Insurance Policy
IDV meaning stands for the sum insured amount of an insurance policy. Here’s how the IDV value impacts the premium of your Comprehensive Car Insurance Policy.
Valid Only on Comprehensive Plan
IDV is the main component of a Comprehensive Car Insurance Policy. One does not need to declare the IDV while buying a Third-party policy, as the car is not insured for damages. Third-party insurance is for third-party liabilities.
Directly Affects the Premium
If you adjust the offered IDV amount on the IDV calculator while buying the policy, you will notice that the premium will also increase or decrease. If you increase the IDV, your premium will also increase. Likewise, if you decrease the IDV, the premium will also decrease.
Advantages and Disadvantages of Decreasing IDV (Low IDV)
Insured Declared Valuer is directly proportional to the premium of your car insurance policy. If you decrease the IDV in the IDV calculator, your premium will also decrease. Here are the pros and cons of decreasing the IDV.
Advantages
Disadvantages
The premium of your car insurance policy will be reduced.
You save money when you pay less for buying the insurance policy.
The money can be used for other purposes.
The sum insured will be reduced. Hence, the claim amount will be lower in the case of total loss.
If the accidental damage expenses are higher, you will have to compensate for it.
You will suffer a loss due to a lower claim amount.
Advantages and Disadvantages of Increasing IDV (High IDV)
IDV is directly proportional to the premium of your car insurance policy. If you increase the IDV in the IDV calculator, your premium will also increase. Here are the pros and cons of increasing the IDV.
Advantages
Disadvantages
The sum insured of your car insurance policy will increase.
You will get a higher claim amount.
It will offer you enough funding to buy a new car in case of vehicle theft or total loss.
The premium of your car insurance policy increases.
You might never raise a claim for a total loss.
You will incur a loss by paying more money than required.
IDV and Claims
In most cases of a car insurance claim, the IDV is not required for the calculation of the claim amount. However, while buying a Comprehensive Car Insurance policy, it is important that you declare the IDV every year. The IDV of your car will reduce due to a decrease in its market value i.e. the value will depreciate with time. IDV comes into the picture for claim settlement only in the following situations.
Theft
You can raise a theft claim after the police declare your vehicle as “non-traceable”. In this situation, ACKO will settle a claim amount that is approximately equal to the IDV of your car.
Constructive total loss
When a vehicle gets damaged due to a contingency, ACKO will assess the extent of the damage. If there is damage of 75% or more, it will require extreme repairs. Here, the repair cost will exceed its IDV. Thus, a total loss claim should be raised.
Total loss
In an unfortunate situation where the car gets damaged beyond repair, you can raise a Total Loss claim. Here, the IDV component of the car will be taken into account for settling the claim.
When Should You Buy a Car Insurance Policy with a Lower IDV?
Setting a lower IDV for your car would mean receiving a lower claim amount in case of total loss or theft. A total loss occurs when the car gets severely damaged, and its repair cost is more than the car’s value. In this situation, the insurance company will pay the IDV amount that you have set for the car while buying your car insurance policy.
However, you may prefer to set a lower IDV for the following reasons.
If you have an older car whose value is very low.
If you have a certain budget set for buying a car insurance policy.
If you are ready to opt out of some very important car insurance benefits and coverages.
Busting Myths About IDV in Car Insurance
Here are some common myths about IDV in car insurance.
Myth: You cannot change the IDV suggested by the insurance company.
Fact: You can change the IDV the insurance company does not offer a fixed value. You must select the right IDV from the range suggested by your car insurance company.
Myth: If this is the IDV of my car, it is also the resale value.
Fact: The resale value of a car depends upon many factors, such as the car’s condition, its maintenance schedule, etc. IDV is in no way the indicator of its resale cost.
Myth: Decreasing the IDV will save premium.
Fact: Decreasing the IDV will decrease the premium, but it will also affect the claim amount in case of a major claim.
Frequently Asked Questions about IDV in Car Insurance
FAQs on IDV in car insurance
Q1. What is ideal IDV for car insurance?
The ideal IDV for car insurance varies from one car to another, depending on the make/model and vehicle’s age. The ideal IDV is the approximate market value of the vehicle while buying car insurance.
Q2. Should we keep IDV high or low?
You should keep the IDV optimum so that you don’t incur losses during the major claim settlement. Keeping the IDV high will result in a higher premium, and keeping it low will result in a lower claim settlement.
Q3. How is car IDV calculated?
The car IDV is calculated after accounting for factors like the car’s age and the price of the vehicle after factoring in the depreciation value.
Q4. Is it good to have higher IDV?
Having a higher IDV is good if you do not mind paying a higher premium. Higher IDV will result in a higher claim settlement amount. However, do not overstate the IDV, as it may result in the rejection of claims.
Q5. What is the new IDV in insurance?
A new IDV is nothing but the updated IDV of a vehicle after it becomes old. In other words, it’s the updated IDV after considering the depreciation suffered by the vehicle.
Q6. Can I increase IDV?
Yes, you can increase the IDV while buying/renewing car insurance.
Q7. What is IDV for a new car?
The Insured Declared Value of a new vehicle is based on the manufacturer’s price minus the depreciation cost of the vehicle. Please note, the depreciation rate is based on the depreciation rate for fixing Insured Declared Value published by the Insurance Regulatory and Development Authority (IRDA) of India. The IDV of a new vehicle is probably the easiest to calculate. This is because the depreciation value i.e. the reduction in the value of a car with time is only 5%. This amount is almost negligible for some cars. You can set the IDV of your new car by deducing this depreciation amount from the invoice value of the car and then set the IDV while buying your car insurance policy. In most cases, your car dealer will suggest the type of coverage you should buy. Buy a policy that suits your requirements.
Q8. How to choose the best IDV for my car policy?
Here are some tips to decide IDV for car insurance:
Ensure the IDV is the market value of your car, since insurance companies will compensate based on the type of loss and not necessarily the entire IDV.
A lower premium amount can be due to lower IDV, hence, make sure you do not choose a policy based on a lower premium rate.
If you have included accessories in your car, it’s advisable to insure the accessories as well. However, this will increase the IDV and the premium amount accordingly.
Q9. Why does the IDV vary between insurance companies?
To keep the premium rate low, the IDV is decreased. Ensure you choose the right insurance company which offers accurate Insured Declared Value for your vehicle even if the premium amount is higher.
Q10. Why do some insurance providers keep the IDV of the car low?
By reducing the IDV of the car, the premium rate of the insurance policy decreases accordingly. You need to choose the right IDV which is equivalent to the market value of the car.
Q11. What is the IDV of a car outside the showroom?
When the car comes outside the showroom, the car value depreciates due to use and age. Since the market value of the car drops as soon as the car is driven out of the showroom, the IDV decreases accordingly.
Q12. Will the location of purchase have an impact on the IDV of my car?
Yes, the IDV of your car may increase or decrease based on the ex-showroom price of your car. As the ex-showroom price is different in different locations, the IDV will also vary.
Q13. Is there an option to increase the IDV of a car?
Yes, if you are buying a car insurance policy online, you will have an option to increase or decrease the IDV of your car. However, it is advised that only the correct IDV should be declared by the car owner.
Q14. Is it a good idea to increase the IDV of my car?
No, increasing the IDV will lead to an increased premium. You should avoid this if the chances of you raising a total loss claim are low as compared to other types of claims.
Q15. What is the meaning of IDV and NCB?
IDV stands for Insured Declared Value while NCB stands for No Claim Bonus. IDV is the approx. current market value of your car. NCB is a discount you will get at the time of policy renewal if you do not raise a claim in the previous policy.
FAQs related to IDV and premium
Q1. How does IDV affect your car insurance premium?
The car insurance premium is directly proportional to the market value of the car or the IDV. Hence, the Insured Declared Value is the primary influencer in the insurance premium amount.
Q2. What is the difference between IDV and premium?
IDV is the sum insured amount of the policy, and the premium is the amount you pay to purchase a car insurance policy.
FAQs related to IDV calculation
Q1. What is meant by the IDV calculator?
IDV calculator is an online tool that helps you to calculate the IDV of your car.
Q2. How can I calculate the IDV of my car?
You need to take into account the current market value of your car i.e. consider the original cost of the car and subtract the amount of depreciation. The value you get is the IDV of your car.
Q3. What is the IDV or the depreciation percentage for car insurance every year?
The IRDAI fixes the depreciation rate based on the age of the vehicle. While it is 5% for vehicles less than 6 months old, vehicles less than 1-year-old, the rate is 15% and thereafter it is 20%, 30%, 40%, and 50% every year.
Q4. Is there a difference in how IDV is calculated for commercial and private vehicles?
No, The IDV of a vehicle depends upon its market value and depreciation. It does not matter if a vehicle is private or commercial. The IDV is calculated in a similar way for both.
Q5. How to check the insurance value of a car?
The insurance value of a car is based on the Insured Declared Value of the vehicle. Also known as IDV, it is the approximate market value of the car. To check the IDV of a car, you can utilise the car insurance premium calculator, an online tool, to quickly find out the cost of insurance for a car.
FAQs related to renewal
Q1. What happens during car insurance renewal?
One should not renew their car insurance policy in a haste, as this can lead to major financial losses at the time of a car-related mishap. Make sure that you have already deduced the IDV of your car before car insurance renewal. When you begin with the process, you will notice that the suggested IDV is already set. Make sure to change this value if it is not close to the actual IDV of your car.
Q2. I noticed that the IDV of my car reduces at every renewal. Why does this happen?
Each year your car’s value depreciates i.e. reduces due to wear & tear and usage of parts with time. Depreciation is the main component for calculating the IDV of a car. This is why IDV decreases each year at the time of car insurance renewal.
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