Factors Affecting IDV in Car Insurance That You Should Know
The Insured Declared Value (IDV) is the highest sum a car insurance company pays to the vehicle owner
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What is IDV and its Significance?
When you buy or renew car insurance, one of the first terms you'll probably come across is the IDV (Insured Declared Value). It is your car's current market value after depreciation over time. IDV in car insurance matters because it directly decides how much you'll get from your insurer in case of a claim due to theft or total damage.
If you pick an IDV that's too low, you risk being underpaid during a claim. On the other hand, if you choose a much higher IDV, you may end up overpaying premium amounts. Hence, choosing the right value is important. You should know that IDV is only applicable for a comprehensive car insurance plan and not third party insurance.
How is the IDV Calculated?
The IDV of a vehicle is based on its purchase price and its depreciation over time. The formula used to calculate IDV is:
IDV = Manufacturer's listed price of the vehicle - Depreciation
Depreciation rate of a vehicle is set by IRDAI (Insurance Regulatory and Development Authority of India) based on the vehicle age. The table below shows the depreciatIon percentage of a car's value as per its age:
| Age of Vehicle |
Depreciation Rate |
| Up to 6 months |
5% |
| 6 months - 1 year |
15% |
| 1 - 2 years |
20% |
| 2 - 3 years |
30% |
| 3 - 4 years |
40% |
| 4 - 5 years |
50% |
| Over 5 years |
Mutually decided between insurer and car owner |
How to Use an IDV Calculator?
Most insurers and insurance aggregator websites like Policybazaar.com provide free access to an IDV calculator. It typically:
- Takes your car details and registration date,
- Fetches the ex-showroom price for your variant, and
- Applies depreciation to show the estimated IDV.
You can also manually change the IDV within a small range (usually ±10%). This is useful if your car is in excellent condition or if you want a slightly lower premium.
6 Factors That Affect IDV in Car Insurance
The following are the main factors affecting IDV in a comprehensive car insurance policy:
-
Age of the Vehicle
The age of your vehicle is the most prominent factor that impacts its IDV. As your car gets older, its IDV decreases. Remember that if you choose a lower IDV, it may reduce your car insurance premium but will also reduce the claim amount.
-
Make, Model, and Variant
The type of vehicle you own has a significant impact on IDV. A high-end variant of the same car will have a higher IDV than its base variant.
-
Depreciation Rates
The value of your car's components declines over time, and consequently reduces its IDV. Here's a table to give you a clear idea of the depreciation rate of different types of car components:
| Car Components |
Depreciation Rate |
| Fiberglass Parts |
30% |
| Plastic/Rubber/Nylon/Batteries/Airbags/Tyres & Tubes/Paintwork |
50% |
| Glass Parts |
Zero |
You can avoid the vehicle depreciation rate during claim if you opt for a zero depreciation add-on while buying or renewing comprehensive or own damage car insurance.
-
Type of Fuel
The type of fuel a vehicle consumes is another factor that affects its IDV, particularly in the initial years.
- Diesel vehicles generally have a higher IDV due to their expensive purchase price.
- Petrol cars may depreciate at the same pace but have lower IDVs.
- Electric vehicles are priced differently. The cost of the battery is often a key factor in deciding the IDV of EVs.
-
Place of Registration
The taxes and charges levied in an area on a new vehicle determine its on-road price, leading to a higher IDV.
The on-road price of a car in metro cities like Delhi and Mumbai is generally costlier than in the smaller cities. It results in higher IDVs for vehicles registered in major cities and vice versa.
-
Modifications and Accessories
Only factory-fitted equipment is generally covered in insurance. Any aftermarket additions must be properly communicated to your car insurance company for extra coverage.
For example, if you've installed an expensive sound system, alloy wheels, or a CNG kit, these won't be covered unless you've informed your insurer. You will not receive compensation for unlisted additions during a claim.
-
Vehicle Condition (For Older Cars)
After the five-year mark, the car's IDV is no longer a standardised value. Insurance providers may need a physical inspection or photographs. They might also consider your car's maintenance or claim history.
Why You Shouldn't Always Opt for the Lowest IDV
Although a lower IDV might seem attractive for the affordable car insurance premium, it also means a lower claim amount during an emergency.
The claim compensation for a car valued at Rs. 7 Lakh with an IDV of Rs. 5.3 Lakh will not equal the actual costs incurred. It is crucial to choose a policy coverage with an IDV reflecting the right market value of your car.
Choose IDV Wisely
In conclusion, the insured declared value (IDV) for car insurance is about finding the right spot; neither too high nor too low. The right IDV will give you peace of mind that your car is adequately covered without costing too much. You can always use an IDV calculator to make this choice much simpler. Also, remember to compare car insurance quotes and the IDV offered for your car by different insurers before you make a final purchase.
