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Insured declared value i.e. IDV is an important factor that determines the premium of your car insurance policy. Understanding the concept of IDV in car insurance and how it is calculated is essential as in case of a claim for theft or total breakdown of the car, the insurance company will provide you compensation only up to the IDV amount. To calculate the IDV of your car you can make use of an IDV calculator which is an online tool.
IDV in car insurance refers to insured declared value i.e. the total market value of your car; it is the amount you would be eligible to receive in today’s times in case of sale of the car. In case the vehicle suffers total loss or is stolen, the insurance company will provide compensation up to the IDV amount.
Insured declared value is calculated based on the manufacturer’s listed price minus depreciation. The cost of registration, insurance and factory fitted accessories is not considered when calculating the insured declared value.
The formula for calculating IDV is:
IDV= company’s listed price - depreciation value + cost of vehicle accessories-depreciation value of the parts of the vehicle
The above formula can be put to use only when calculating the insured declared value of a car equipped with new accessories that are not company fitted.
IDV calculation is simple in case you have not added any extra accessories to the car. You can use an IDV calculator having the below simple formula
IDV= Manufacturer’s registered price-depreciation value
The below depreciation rates are applicable based on the age of the car.
|Age of the Car||Depreciation %|
|6 months and below||5%|
|6 months to 1 year||15%|
|1 year to 2 years||20%|
|2 years to 3 years||30%|
|3 years to 4 years||40%|
|4 years to 5 years||50%|
For instance, if your car is less than 6 months of age and its current market value is Rs. 10,00,000 then at 5% rate of depreciation, the IDV would be around 9.5 lakhs. However, if the car is above 6 months-1 year, then at 15% rate, the IDV would be 8.5 lakh. It is important to note that at the time of claim, you will be eligible to receive insured declared value only if the car is stolen or suffers constructive total loss i.e. the repair costs of the vehicle is 75% more than its set insured declared value.
Car insurance premium and insured declared value go hand in hand. Higher the IDV, higher is the car insurance premium and vice versa. As the value of your car depreciates, the premium also decreases. At the time of selling the car, you will get a higher price if the IDV of the car is high. However, factors such as condition of the car, usage, past car insurance claims, etc. are also taken into consideration.
To attract a low premium, you would set a low IDV for your car, but at the time of theft or total loss, a lower IDV will get you a low claim amount. In case of a higher IDV, you are eligible to receive a higher compensation.
|The premium of your car insurance policy will reduce||Sum insured will be reduced which will attract a low claim amount in case of a claim|
|You will suffer loss due to a low claim amount|
|In case of accidental damages are higher, you will have to pay out of your pocket|
|The sum insured of your policy will increase||The premium for your car insurance policy increases|
|You will be eligible to claim for a high claim amount||You will not be able to raise claim for total loss|
|Receive enough money to repair or replace car parts. You can also use this money to purchase a new car.||You will be in loss for paying more premium than required|
Given below are few factors that determine the insured declared value of your car
Insurance companies consider the age of your car when determining the premium as older the car, lesser is the market value i.e. its insured declared value and vice versa.
The make and model of your car has a huge influence on its IDV. The cost of insuring a high end car like a Lamborghini would be higher than that of a Hyundai or Maruti car. High end luxury cars require higher cost and maintenance owing to which the insurance cost is higher.
This refers to the city in which your car is registered. For instance, the IDV of a car will be higher in metro cities like Mumbai, Pune, Delhi since the car would be open to more risks in traffic than ones running in smaller towns.
The value of your car depreciates as it ages; it depreciates in the form of percentage based on its age as mentioned in the above table.
When calculating the IDV of your car, keep in mind the below important things.
This type of car insurance provides coverage to third party life and property and does not cover the insured vehicle
This type of car insurance provides coverage to your vehicle as well as third party and property
This type of insurance provides coverage for your car’s damages and losses including events caused due to man made, natural calamities, and theft.
Insurance companies reduce the IDV of the car to attract less premium. However, when paying a premium for the policy, always check on the insured declared value as you need to choose the right IDV which is equivalent to the value of your car.
Higher the insured declared value, higher the car insurance premium and vice versa. The cost of insuring a car having a high market value is higher and hence is the premium.
Opting for a higher IDV is a good option only if you own a luxury car, the spare parts of your car are expensive, or if you are willing to pay a higher premium and are looking for more coverage.
If an individual declares a low IDV, he will have to pay less premium. However, the claim amount he will get at the time of total loss or theft of the car will also be less.
Factors such as car registration details, make and model of the car, age of the car, and depreciation rates have a great impact on the calculation of the IDV.
Insured declared value refers to the existing market value of your car minus the depreciation factor which is calculated based on its age.
When you purchase a new car and take it outside the showroom, its value depreciates by 5% directly.
Yes, at the time of policy purchase, you can choose to increase the IDV of the car. However, it is necessary to declare the correct IDV.
Yes, IDV of your car is impacted based on the location as different cities and states in India have different ex-showroom prices of the car.
Opting for a high IDV is a wise choice only if you have an expensive car.
IDV is calculated based on the age of the car and the standard depreciation rates mentioned below.As the car ages, its value starts depreciating.
Car age 6 months & below: 5% depreciation
Car age 6 months to 1 year: 15% depreciation
Car age 1 year to 2 years: 20% depreciation
Car age 2 years to 3 years: 30% depreciation
Car age 3 years to 4 years: 40% depreciation
Car age 4 years to 5 years: 50% depreciation
For cars above 6 months, IDV reduces by 10% each year