Introduction
Insured Declared Value plays a central role in determining claim payouts under car insurance. Despite its importance, many either overlook it or choose it incorrectly at the time of buying or renewing the policies.
In this article, you will know what is IDV in insurance, how it works, and how incorrect selection can affect your claim amount. Whether you are purchasing a new policy or renewing car insurance online, knowing how to choose the right IDV can help you avoid unexpected expenses and ensure adequate financial protection.
Can Choosing the Wrong IDV Cost You Thousands During a Claim?
Yes, choosing the wrong IDV in car insurance can result in significant financial loss during a claim.
IDV represents the current market value of your vehicle. It is basically the maximum amount your car insurance company will pay in case of total loss or theft.
If you choose a lower IDV, your premium decreases, but your claim payout is also reduced. On the other hand, selecting a higher IDV increases your premium without necessarily increasing the actual claim amount beyond the vehicle’s market value.
Incorrect IDV selection can therefore lead to either underinsurance or overpayment.
For example, if your car’s actual market value is ₹5 lakh but you select an IDV of ₹3 lakh, you may lose ₹2 lakh during a total loss claim.
How Is IDV Calculated?
IDV in insurance is determined based on the manufacturer’s listed selling price minus depreciation. Factors such as vehicle age, model, and condition affect the IDV. You can also use the IDV calculator. All the insurance companies have one.
Know that depreciation is applied as per standard guidelines, and it reduces the vehicle’s value each year. When purchasing car insurance online, the IDV is often suggested automatically, but you can usually adjust it within a permissible range.
What Are The Benefits of IDV?
The benefits of IDV are as follows:
IDV determines the maximum claim amount in case your car is a total loss or stolen.
It helps maintain adequate financial protection of the vehicle.
IDV ensures fair premium calculation when buying a car insurance policy.
Insured Declared Value also prevents underinsurance by reflecting the actual vehicle value.
It helps in avoiding overpayment when IDV is selected appropriately.
IDV is standardised across most car insurance company providers, bringing uniformity.
IDV also provides clarity on vehicle valuation.
How Does Low IDV Affect Our Car Insurance Claim?
When you choose a lower IDV in car insurance, you reduce your premium. However, this also reduces the maximum compensation you can receive, and it can lead to significant financial loss, especially if the vehicle is completely damaged or stolen.
So, it is important to set the IDV after careful consideration.
How Does High IDV Affect Our Car Insurance Claim?
Choosing a higher IDV in insurance means you pay a higher premium. Insurers assess the actual market value during claims, so an inflated IDV does not always result in higher payouts. So, this can lead t paying higher premiums uselessly without proportional benefits.
For example, if your car’s market value is ₹5 lakh but you select ₹6 lakh as IDV, you may pay a higher premium but still receive compensation closer to ₹5 lakh.
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