Is Higher IDV Considered Better in Car Insurance?

When buying or renewing car insurance, insurers usually allow you to select your car's Insured Declared Value (IDV) within a specific range. Many vehicle owners assume that choosing the maximum available IDV offers the best coverage, but that is not always true. Read on to know whether a higher IDV is better for car insurance or not.Read more

What Does Higher IDV Mean in Car Insurance?

A higher IDV in car insurance means that your car is insured for a higher value. It increases the maximum compensation your insurer will offer you if your car is stolen or declared a total loss (damage beyond repair).

For example, if your car's IDV is set at Rs. 6 lakh, this will be the maximum payable claim amount in such situations. However, insurers generally provide a range for IDV. If you choose the highest value, it will not only increase your premium amount but might also not be required or cost-effective.

How Insurers Determine the IDV of a Car?

Insurers estimate a car's IDV by considering its manufacturing selling price and depreciation based on its age. Here is the depreciation slab as per the IRDAI that insurers use to determine IDV:

What Happens if You Choose a Higher IDV for Your Car?

When you select a higher IDV in insurance, your car gets insured for a higher value, which leads to a:

• Higher Claim Payout: In case of theft or total loss, the insurer may pay up to the declared IDV.
• Increased Premium: Since the coverage amount increases, the car insurance premium also rises.
• Better Financial Protection: A higher IDV may reduce the risk of underinsurance if the car is relatively new or valuable.

Note: If you choose an unrealistically high IDV for your car, it might not always be beneficial. This is because insurers set IDV limits only within an acceptable range of the car's market value at the time you buy or renew your policy.

When a Lower IDV May Make Sense

These are the cases when choosing a moderately lower IDV can help maintain adequate protection at an affordable car insurance premium:

• Your car is older and has already depreciated
• You want to reduce your premium costs
• The difference in claim payout would be minimal
• You do not frequently drive your car

Note: While a lower IDV may seem cost-effective, it may not always offer sufficient financial coverage, and you could face financial loss during claims.

Key Differences Between Higher IDV and Lower IDV

Here is a table to help you understand how a higher or lower IDV affects your car insurance:

So, the table above makes it clear that the right IDV for your car depends on its age, condition, market value, and how much financial protection you want from your car insurance policy.

What Should be the Ideal IDV for Car Insurance?

The right IDV for your car depends on the following factors that you should consider:

• The age of your car
• Its current resale value in the market
• Your car insurance premium budget
• The IDV range provided by the insurance company

Tip: Select an IDV that closely reflects your car's current market value, basically keeping it at par with its depreciated value. This will ensure that you get adequate coverage for your car without paying an excessively high premium.

How to Instantly Estimate Your Car's IDV?

Before buying or renewing car insurance, you can quickly determine the approximate IDV for your car using an online IDV calculator, which considers factors such as:

• Your car's make & model
• Registration year
• Depreciation rates

Wrapping Up!

Choosing a higher IDV in insurance increases your claim payout, but it also raises your premium. So, instead of simply going for the maximum value offered by the insurer, find the right balance between coverage and how much you can afford. Rightfully consider your car's age, its current condition, and the market value. This will help you select the most suitable IDV when you are buying or renewing your car insurance policy without straining your budget.