Table of Content
Introduction
When purchasing or renewing car insurance, you may come across IDV and assume that choosing the highest value will provide better protection. However, understanding what is IDV in insurance important, as it helps you understand how IDV affects claim settlement.
Insured Declared Value plays a crucial role in determining the claim compensation under a comprehensive car insurance policy if a vehicle is stolen or declared a total loss. At the same time, it also influences the car insurance premium you pay.
What is IDV in Car Insurance, and What Does it Represent?
IDV in insurance stands for Insured Declared Value. This value simply means the estimated current market value of your vehicle, or it can also be described as the maximum amount that an insurer is liable to pay when your car is declared a total loss or stolen.
The insured declared value is only applicable in a comprehensive insurance policy, and not on third-party car insurance. When you buy car insurance online, it is important to take the IDV into consideration and use the IDV calculator to help estimate this value. The IDV directly affects both the claim limit and the car insurance premium.
In case of vehicle theft, if your car is insured under a comprehensive car insurance policy, and cannot be recovered, the insurer will compensate up to the IDV mentioned in the car insurance policy.
Read More on: What is IDV in Car Insurance and Calculation
How is the IDV of a Car Calculated in India?
The insured declared value of a car is calculated on the basis of the manufacturer's listed selling price and depreciation. A new vehicle has minimal depreciation, while a five-year-old vehicle has a significantly lower IDV.
When calculating IDV for your car, the following factors are considered:
1. The manufacturer’s listed price of the vehicle
2. Age of the vehicle
3. Depreciation percentage
4. Accessories installed in the car
5.. Current market trends
Most insurance providers offer an IDV calculator for cars when you buy car insurance online.
When purchasing new car insurance, the IDV is close to the vehicle’s ex-showroom price because depreciation has not yet significantly reduced its value.
Does a Higher IDV Increase the Car Insurance Premium?
A higher IDV generally leads to a higher car insurance premium because the insurer’s potential liability increases in this case.
Apart from IDV, the car insurance premium is influenced by the following factors:
1. Vehicle type
2. Add-on covers
3. Location of registration
4. Claim history
Read More on: Top Factors That Affect Your Car Insurance Premium
If the IDV is increased significantly while purchasing car insurance online, the premium will increase, but the claim settlement will still depend on the vehicle’s actual market value at the time of loss.
Is a Higher IDV Always Beneficial?
No, it is not. This is mainly because a higher IDV increases the car insurance premium and may not necessarily result in higher claim payouts. Claims rarely go beyond the vehicle’s realistic market value.
On the other hand, selecting an extremely low IDV may reduce the premium but could result in insufficient compensation in case of theft or total loss. In such a scenario, the claim amount may not even be sufficient to replace the car.
Therefore, the most balanced approach is to select an Insured Declared Value that accurately reflects the vehicle’s depreciation-adjusted market value.
If a vehicle is insured under comprehensive insurance and is declared a total loss after an accident, the insurance company will compensate up to the IDV mentioned in the car insurance policy
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