Importance of Insured Declared Value in Car Insurance
The insured declared value (IDV) of a car is the maximum sum assured and fixed by the
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Why is IDV in Car Insurance Important?
IDV in car insurance is one of the significant factors that decide your premium amount. Here is why it greatly matters in a motor insurance policy:
- Ensures maximum compensation to the insured car owner for theft or total damage.
- Your car's insurance premium is based on its IDV. A higher IDV would mean a higher risk factor and hence, higher premiums.
- Claims for repair and replacement are based on the insured car's IDV.
- The IDV reflects the insured car's depreciated value, which keeps decreasing over time.
How is IDV in Car Insurance Calculated?
A car's insured declared value (IDV) is calculated based on factors such as car make and model, depreciation, current market value, and selling price.
Insured Declared Value (IDV) calculation with added accessories
IDV = (Car's selling price - Its Depreciation) + (Cost of accessories not included in selling price - Depreciation of Accessories)
Insured Declared Value (IDV) calculation with no added accessories
IDV = Car's selling price - Depreciation of the Insured Car
Calculation of Depreciation
Standard schedule for depreciation as per the India Motor Tariff
| Age of the Vehicle |
% Depreciation |
| Not exceeding 6 months |
Nil |
| Exceeding 6 months but <1 yr |
5% |
| Exceeding 1 yr but <2 yrs |
10% |
| Exceeding 2 yrs but <3 yrs |
15% |
| Exceeding 3 yrs but <4 yrs |
25% |
| Exceeding 4 yrs but <5 yrs |
35% |
| Exceeding 5 yrs but <10 yrs |
40% |
| More than 10 years |
50% |
Car owners can also use the IDV calculator on their insurance provider's website for faster calculation.
Factors that Affect IDV in Car Insurance
Some essential factors that car insurance providers consider while calculating a car's insured declared value (IDV) are:
- Make and model of the car. Premium cars have a higher IDV.
- The age of the car: older cars have lower IDV.
- Cars registered in metro cities will have a higher IDV due to more on-road risks than cars registered in non-metro cities.
- As the car ages, its IDV changes upon mutual agreement between the insurer and the insured based on the car's depreciation
Choosing the Right IDV for your Car
Car owners can choose to have a higher IDV or a lower IDV as per their convenience after considering the following information:
- New cars should have a high IDV for maximum claim coverage, as there is zero depreciation.
- Premium cars should also have a high IDV, as replacement costs are expensive.
- Older cars that are near replacement can have lower IDV and lower premiums. This is ideal for car owners who do not want to claim for replacements.
- Undervaluing your IDV can help reduce the premium amount but lead to insufficient coverage during claims.
- Overvaluing your IDV will inflate the premium amount without offering any real benefit.
When is the Total Insured Declared Value (IDV) payable?
The total insured declared value (IDV) of a car is payable in two scenarios:
- Theft of the insured car: Theft is considered a total loss of the vehicle, and the insurer has to pay the total insured declared value (IDV)
- Total loss of the car: If the insured car sustains 75% damage, it is considered a total loss. This damage can be caused by natural calamities like floods, earthquakes, etc., or man-made calamities like accidents, riots, etc.
Conclusion
Car owners who want to ensure maximum protection in the case of theft or total damage opt for a higher insured declared value (IDV) in their car insurance policy. This is an excellent choice for individuals with new or luxury cars who do not want to incur extra expenses for repairs or part replacements.
