Insured Declared Value (IDV)
It is the maximum Sum Assured fixed by the insurer which is provided on theft or total loss of the vehicle. Basically, IDV is the current market value of the vehicle. If the vehicle suffers total loss, IDV is the compensation that the insurer will provide to the policyholder.
IDV is calculated as the manufacturer’s listed selling price
minus depreciation. The registration and insurance costs are excluded from IDV.
The IDV of the accessories which are not factory fitted is calculated
separately at extra cost if insurance is required for them.
How it works
Now, the value of your car begins
depreciating from the minute of its purchase. If the IDV is low, then the car
premium will also be below.
Could you inflate your IDV? You
could, but the insurer will recognize this ploy. The insurer will factor in the
age of the car and its value in the current market. These factors will finally
decide the claim amount. Unfortunately, you may end up paying a higher premium
and incur losses. But a lower IDV that is less than the reasonable market price
may pose a problem too. This is because you will receive a lower claim amount.
Now, your insurance premium is
directly proportional to the IDV of your car. As your car becomes older, the
premium will reduce
The IDV of your car is directly
proportional to your car insurance premium. This means the higher the value of
IDV more will be the amount of premium charged to you. Similarly, as the IDV
of your car will reduce with its increasing age, the premium amount payable by
you will also reduce.
The whole idea is to get an IDV closest to the market value of your car without
paying enormous amounts as a premium.
Is it good to decrease the IDV value
Insured
Declared Value (IDV) means the maximum value for which your car is insured in
case of total loss/theft in a particular year. This value normally decreases as
the car depreciates over its lifespan. The value is mutually agreed upon between you
and the insurance company and set at the start of your insurance policy every
year.
The insurance premium is calculated based on this value. For the same premium rate, a lower IDV implies a lower premium and a higher IDV would mean a higher premium. Normally, most insurance companies allow you to choose an IDV within a certain pre-specified range. This is because the IDV of your vehicle depends not only on its depreciated value but also on its market value.
Therefore, you have the option of
choosing a slightly lower IDV so as to reduce the premium payable. You can
either do it by visiting the insurance company's portal or tell your adviser to
do it for you.
Is IDV important for car insurance?
Yes, it is, As explained, IDV is the amount that
you will get in case your vehicle is stolen or suffers a total loss. It is highly
recommended to get IDV which is near the cost of the market value of the car. Insurers
provide with a range of 5% to 10% to decrease IDV which could be chosen by
customers. Less IDV would attract less premium.
For example, the Own Damage cover is a
beneficial yet optional cover that compensates you in case your car is said to
be totally lost due to an accident or calamity. The premium for Own Damage (OD) the cover is calculated as a percentage of IDV. This premium is up to 2-3 percent
of the IDV, basis the age and cubic capacity of the vehicle. Simply remember,
the greater the IDV, the higher is the premium and vice versa. So if you
haven't calculated the IDV for your car, it will be nearly impossible to arrive
at the OD premium.
High IDV Higher compensation will be paid during theft or
total loss claims Higher premium amount to be paid Low IDV Lower premium amount
to be paid Lower compensation will be paid during theft or total loss claim
settlement leading to losses
Getting an IDV that
is close to the market value of your car is always the best bet. Decreasing the
IDV value will result in a lower premium but it also provides you with lower
coverage than is required. As your car grows older, the IDV decreases as it is.
This is the link to calculate the IDV of your car:
Ultimately, the Insured Declared
Value plays an important role in determining the premium of your car at the
time of purchase and renewal both. It is important to mention the correct IDV;
otherwise, it may hamper your claim process.
