Know everything about Insured Declared Value (IDV) in Car Insurance Policy

There are some terms in motor insurance that make the policyholders confused and intimidate them. One such term is the IDV value in insurance. So what is IDV in car insurance?  It is nothing but the current market value of the vehicle. If the policyholder needs to make a claim after the theft of the vehicle, the IDV is the sum insured amount that he will receive in totality. Take a look at this article to know more about IDV and why it plays such an important role in motor insurance.

What is Insured Declared Value (IDV) in Car Insurance? 

Let us begin by understanding what exactly the IDV is in motor insurance. When you buy a car, you pay a sum of money for it. This is the value of the car and the insurance cover you purchase corresponds to it. If the car is a luxury car and costs high, your car insurance premium will be high too. On the other hand, if you buy a small car that is lower in value, the insurance premium rates will also be lower.

As your car ages, the value of the vehicle begins to drop. This is because depreciation kicks in and the body, interiors and spare parts of the vehicle begin to depreciate in value. As a result, the overall value of your car falls. The value of the car is declared after close analysis. This is then equated against the insurance coverage needed and the premium of the policy is decided upon.

To put it in simple words, therefore, the IDV is nothing but the current market price of your car. If you sell your car today, that is the sum you will receive. Since it will be lower than the sum you paid for your brand new car, the premium cover will also be different.

What is IDV in Car insurance and How is it important?

Now that we already know what is IDV in car insurance, let us move on to the important role it plays in your motor insurance policy. Here are some points to help you understand this better:

1. Declaration

The IDV amount is jointly declared by the policyholder and the insurance provider. There is a chart that many insurance companies follow for vehicles that are less than five years old. For shorter durations, usually, the following figures apply to the value of depreciation:

• Under 6 months – 5%
• More than 6 months and under 1 year – 15%
• More than 1 year and under 2 years – 20%
• More than 2 years and under 3 years – 30%
• More than 3 years and under 4 years – 40%
• More than 4 years and under 5 years – 50%

Since depreciation is directly related to the IDV, these figures play a crucial role. 

2. Calculation

The IDV full form in insurance stands for insured declared value. The insurer declared this value after calculating factors such as the make and model of the car, the accessories fitted, the depreciation, etc. Most insurance providers have calculators on the websites through which this calculation can be easily done.  

3. Effect on premium 

After the IDV is calculated, it plays a very vital role in helping the insurer determine the premium. If the IDV of the vehicle is high, the premium automatically becomes high. This is because a car that is higher in value needs to be insured with a more valuable insurance plan. On the other hand, if the IDV is lower, the motor vehicle insurance plan’s premium also becomes lower.

4. Warnings to remember

There are many warnings that you must remember when you declare the value of your car. If you under-declare the value, just to get a discount on the car insurance premium, you will get a much lower claim amount. That can prove to be an unwise decision in the long run. Similarly, if you over-declare the value, you will unnecessarily end up paying more premium and that too will be financially draining in the long run. If you lie about the actual value of the car or make any other error when declaring the IDV, you will end up in a lot of trouble at the time of a claim. The claim amount may be reduced, or worse, your entire claim may also be rejected.

Keep all the points mentioned above in mind and you will not face any issues when the IDV calculations are underway.

3 Factors that affect the IDV value in insurance 

• Make and model of the car: The make and the model of the car plays an important and obvious role here. A high-end imported car, such as a BMW X1, will obviously have a higher value than, say, a Maruti Suzuki Ritz. This is why the nake and the model of the car is taken into consideration when calculating the exact and correct IDV of the vehicle.
• Accessories: Some accessories in the car are fitted by the motor manufacturer while some get attached by the owner of the car. The number and value of the accessories also play a role. If the car has many accessories, it increases the value of the car and vice-versa and the value of the IDV also charges accordingly.
• Age: And finally, an older car has a lower IDV than a newer car. This happens due to the factor of depreciation and the fall in the market value of the vehicle.

In conclusion:

The IDV, or the insured declared value, is not a complicated concept in car insurance. However, you need to read up and understand it well to get the maximum value out of your motor insurance cover. Go ahead and speak to your insurance provider if you need any further clarification. Also, be honest and open about the IDV or else you may face several issues at the time of processing your claim. Keep all the points mentioned above in mind and fox the IDV in a logical and profitable manner.