Insured Declared Value (IDV) in Car Insurance

Insured Declared Value (IDV) is the maximum sum assured that is fixed by an insurer and provided as compensation to the policyholder, in case of total loss or theft of the latter’s vehicle.

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IDV is a crucial factor in the computation of the sum assured in case of car insurance policies.

For each insured vehicle, the IDV is fixed right at the beginning of the policy term and it remains unchanged throughout.

The IDV value of car once purchased, along with that of the company-fitted accessories, is fixed on the basis of the manufacturer’s listed price for that car model at the beginning of the policy. Following that, at each renewal, the value is adjusted as per the applicable depreciation.

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How to Calculate Insured Declared Value (IDV) of Car Insurance?

IDV is the amount that is paid out to the vehicle owner, in case of total loss, damage or theft of the vehicle. It also determines the vehicle insurance premium that one has to pay, which in turn is based on the vehicle’s brand, model, and age.

The Insurance Regulatory and Development Authority of India (IRDAI) has devised certain guidelines in order to compute IDV for car. According to these norms, the IDV value of a car can be up to 95% of its showroom price. Until the vehicle is six months old, this IDV value of car remains the same, beyond which, the value begins to depreciate.

Schedule of Depreciation Determined by Authorities:

In case of cars that are over five years old, there is no fixed depreciation value and there is no set formula for the calculation of IDV value of car – it is arrived at by a mutual agreement between the car owner and the insurance provider. The old vehicles’ condition is thoroughly assessed (by car dealers, surveyors, etc.), following which, the IDV value of car is computed. This IDV is then used by the insurance company to determine the premium amount.

As a formula, the IDV value of car is arrived at after deducting depreciation from the manufacturer’s listed selling price. The value of any accessories in the vehicle that are not fitted by the manufacturer is calculated separately as an extra cost, in case insurance is needed for them. Insurance costs and registration are not a part of the IDV value of car calculation.

Significance of IDV (Insured Declared Value)

IDV is extremely important, as it determines the amount of car insurance premium that one has to pay. It also determines the exact value of the car that must be reimbursed to the owner in the event that the car is stolen, or goes through a major accident or total loss.

Higher the IDV value of car, higher is the premium and vice versa. Some people may therefore intentionally put wrong estimates in order to lower the IDV; however, this turns out to be an unprofitable decision in the long run.

In case of an accident or a total loss, insurance providers do not consider the vehicle’s market value, they take into account the IDV value of car mentioned while taking the policy. Accordingly, the car insurance claims are settled. Therefore, getting IDV that is closest to the car’s market value cost is recommended.

Although it may initially pinch to pay a high premium, the benefits therein definitely outweigh this initial expenditure. Mentioning the right IDV value of car when purchasing the car insurance policy and following the necessary guidelines tilts the scales in the car owner’s favor.