All You Need to Know about IDV in Car Insurance

For many car owners, car insurance online is a complicated subject. While most people give a lot of thought to the make and model of the car they wish to buy, insurance often takes backstage and is bought without much thought. One of the reasons that make insurance look complicated is the industry jargon and commonly used terminology. If you do not know the true meanings of these words and phrases, you may end up choosing the wrong policy that is adequate to meet your needs. One such thing is Insured Declared Value or IDV. It is crucial in determining your vehicle’s value, hence, the sum insured and premium. 

What is IDV in Car Insurance?

IDV in car insurance is the maximum amount of money you will receive from the insurance company if your insured car is either damaged beyond repair or stolen. Simply put, it is the current market value of your car; the maximum compensation that the insurer will give you in case of the total loss of the car. 

When buying car insurance online, IDV is calculated by subtracting depreciation cost from the manufacturer’s present-listed selling price. IDV is exclusive of insurance and registration costs. Also, if the car has any non-factory installed accessories, the IDV will be calculated separately. 

How to Calculate IDV When Buying Car Insurance Online?

You may use an online IDV calculator to estimate the present market value of your car when buying car insurance online. The tool also reflects the premium amount you would need to pay considering the depreciation, age of the vehicle etc. 

Factors Determining the IDV of a Car

  1. Type of car

There are four types of cars available in the market—hatchback, sedan, MUV and SUV. The IDV of the car varies with its type. For instance, since a hatchback is cheaper than a sedan or a MUV, its IDV will also be less compared to other types. 

     2. Make and model

Various car models of the same type may also have different IDVs as it also varies with the year of manufacture and brand of the car.

    3. Purchase location

The cost of the car may vary depending on the purchase location. For instance, the ex-showroom price of the same car will be different in Delhi and Chandigarh. 

    4. Cost of depreciation

The older the car, the more the depreciation will be. It is a reduction in the monetary value of the car over the years. 

     5. Cost of additional accessories

IDV also considers the cost and depreciation of accessories. So, the IDV will change depending on the condition of your car accessories.

How IDV Impacts Car Premiums?

The IDV of your car directly affects your insurance premium. The higher the IDV, the higher will be the premium. As the IDV of your vehicle decreases due to depreciation, the premium amount will also reduce.

What Happens When You Declare a Low IDV?

Since the premium of your car insurance online is directly proportional to the IDV of your car, declaring a low IDV will help you save on premium costs. A lower IDV will surely help you save on the premium cost, but in the event of an accident or theft, your compensation amount will also be lower. In case the expenses of the accident are more than the received IDV, you would have to shell out money from your own pocket to cover the cost.

Should You Declare a Higher IDV?

Declaring a higher IDV will increase the claim amount. However, it will also spike the premium cost. If you declare an IDV that is higher than your car’s actual value, you will end up paying more for covering a lower-value asset.

IDV Related Things to Keep in Mind When Buying Car Insurance Online

  1. Set an IDV which is close to the actual market value of the car
  2. Reducing the IDV will result in lower coverage
  3. Older the car, the lesser the IDV
  4. Choosing an IDV higher than market value can lead to delayed or rejection of the claim

When is IDV Payable?

Not every claim requires an IDV, yet it is important to decide the right amount when you renew your car insurance online. This ensures that your premiums are as per the market value of the car. Additionally, it ensures that when your IDV is required for claim settlement, you receive a fair settlement. Here are some cases where IDV is payable:

  1. Vehicle theft: This is the most common car insurance claim where IDV is payable. In case of vehicle theft, it is considered a total loss and hence, the insurance provider must settle the claim as per IDV. It helps deal with the financial impact of vehicle loss.
  1. Complete loss of vehicle: Another case where IDV needs to be paid is when the vehicle is damaged beyond repair. In cases when the repair cost is more than the total insured value, the insurance company will compensate with the total IDV of the car. This can be in case of severe accidents, riots, earthquakes, or fire. 

Wrapping It Up

When purchasing car insurance online, you are making a long-term commitment. Various insurance companies offer new policy purchases as well as renewal of old policies at competitive rates. When purchasing a comprehensive car insurance policy, IDV in car insurance and premium rates are important considerations to choose your car insurance online. Hence, you must understand the intricacies of IDV in the car insurance process.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.


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