When it comes to car insurance there are a number of factors that play a role in determining the premiums. One of the key elements here is the IDV of the car, which stands for Insured Declared Value. In simple words, IDV is the market value of a car which is determined by its make, model and variant. While it is very simple to calculate the IDV of your car using the IDV calculator, it is important to understand what IDV is, how it affects your premium and what effects IDV can have on your car insurance claims.
The IDV of your car is basically its value. It is the maximum liability that the car insurance company would take for your car. In case your car gets stolen or suffers total loss (where the cost of repair is more than the car’s cost), the car insurance company pays you this amount, which is the IDV. When you use a car insurance calculator to calculate the car insurance premium, you have the option to customise the IDV. Keep in mind that the IDV is not determined by the purchase value of the car, but it is the car’s current market value. And the primary factor that influences the IDV is depreciation.
Role of Depreciation
Just like all other things, a car also loses its value over time. The depreciation of the car is influenced by the age and deterioration of the car. And when you drive your car out from the dealer, it begins to lose value. Every auto owner needs to be knowledgeable about the depreciation rate for adjusting the IDV. The depreciation rates are fixed by the IRDAI, or the Insurance Regulatory and Development Authority of India. The table shows the standard depreciation rates in IDV as per the Motor Vehicle Act.
|Your Car’s Age||Depreciation for IDV ( in %)|
|For initial six months||5%|
|6 months – 1 year||15%|
|1- 2 years||20%|
|2- 3 years||30%|
|3- 4 years||40%|
|4- 5 years||50%|
|More than 5 years||Negotiable|
Calculation of IDV
The value of your car is determined by the car insurance company keeping in mind a number of factors. In case of total loss or theft, the company will compensate you with a replacement cost. A replacement cost is the estimated cost for an item that is similar to the item in question in relation to quality and functionality. The manufacturer’s quoted selling price for the model, year, and brand of the covered car will be used by the insurance provider to estimate the worth of your vehicle. Then, the insurance provider would account for depreciation in this value.
Depending on the IDV of the car, your car insurance company will levy the premium. You can use the car insurance calculator to see the premium break-up.
You Should Remember: The IDV value does not include the cost of insurance or registration. If insurance is needed for the accessories, the price of aftermarket auto parts is also estimated individually.
Factors that Determine IDV
The IDV depends on the following factors that are related to your car:
- Your Car’s Age:
Your car’s age is one of the key elements that affect IDV. The market value of a vehicle decreases with age. As a result, the car which is older will have a lower IDV than a new one.
- Your Car’s MMV:
There are many different automobile kinds in the market, such as MUVs (Multi-Utility Vehicles), sedans, SUVs (Sports Utility Vehicles), and hatchbacks. A car’s type will determine how much it is worth. In comparison to sedans or SUVs, hatchback cars are typically less expensive. The IDV would change as a result.
- Your Location:
The rate of an automobile fluctuates slightly depending on where it is bought. The ex-showroom cost of the same model, for instance, may vary between a metro city such as Mumbai and a city like Panipat.
- Loss Due to Depreciation:
It is a decrease in a car’s market value because of age. The amount of depreciation increases with age. For instance, two vehicles of the similar model that were produced in different years will have a different IDV.
- Accessories You Install in Your Car:
When calculating IDV, accessory depreciation is furthermore taken into account. Because of which its worth will differ based on the state of operation of extra accessories and age.
While you may have used a car insurance calculator, it is important to use an IDV calculator so that you can make a fair estimate of your car’s current value. The free online tool, an IDV calculator takes into account a number of factors and displays the IDV in a few moments. However, the final claim amount will be determined by the insurance provider when the claim is settled.
Meaning of an Increased IDV
Your car insurance policy’s premium is inversely correlated to IDV. Your premium will go up in case there is a rise in IDV.
Pros of an Increased IDV
- Your car insurance policy’s covered amount will rise
- The amount of one’s claim will increase
- It will give you access to enough money to replace or fix car parts. You can get a new automobile with this money as well.
Cons of an Increased IDV
- Your car’s insurance premium rate rises
- An unreasonably high IDV can lead to a claim rejection
- If you shell out more cash than necessary, you will lose money in the long run.
In order to accurately disclose the IDV of your vehicle, you should conduct some market research prior to buying a car insurance policy. Examine the costs of used automobiles with a similar model and production year. This analysis can be done online using an IDV calculator, which would quickly find out your car’s present value. When fixing the IDV try following a moderate approach and try to balance the IDV.