Buying a vehicle insurance policy is a significant long-term decision. It not only helps you fulfil a legal requirement but protects you financially if you suffer an accident, or if your vehicle suffers a man-made or natural catastrophe.
While buying insurance, one of the factors to consider is the premium you have to pay. Several factors determine the cost of insuring your vehicle. Therefore, it is essential to make an informed decision when selecting or renewing your insurance policy.
One of the key elements that influence both the premium of your car insurance and the insurance claims is the Insured Declared Value (IDV) of your vehicle. Unfortunately, many individuals are not fully aware of what IDV means and how it impacts your vehicle insurance.
In this article, we will provide a comprehensive overview of IDV in insurance and its significance for you as a policyholder.
1 What is IDV in Vehicle Insurance?
The term IDV stands for Insured Declared Value. It represents the current market value of a vehicle. This figure indicates the maximum compensation an insurance company will provide if your car is stolen or suffers irreparable damage.
When obtaining insurance, the vehicle owner is required to specify the IDV. This value plays a crucial role in determining the insurance premium. Generally, a higher IDV results in a higher premium. You can use any online IDV calculator before making the decision to purchase your policy.
2 How is IDV Calculated?
The IDV is determined by combining depreciation with the manufacturer’s retail price. Here’s how to calculate IDV for insurance:
IDV = Manufacturer’s Selling Price – Depreciation of Vehicle
If you have accessories, then you need to calculate the IDV for them as well. In that case, the IDV is calculated as:
IDV = (Manufacturer’s Selling Price – Depreciation of Vehicle) + (Accessories Cost – Depreciation of Accessories)
3 How to Use an IDV Calculator to Calculate IDV?
If you find it difficult to calculate the IDV on your own, you can simply use an IDV calculator for calculation. Here are the steps you would need to follow:
Step 1: Visit the website or app of the company whose IDV calculator you prefer.
Step 2: Enter the registration number of your vehicle and press the required button to move to the next stage.
Step 3: Enter other details of the vehicle such as year of registration, variant, type of fuel used, make and model.
Step 4: Enter your mobile number, policy expiry date, and other necessary details.
Step 5: The IDV will be displayed on the screen.
Please note that we have provided a generic process for checking the IDV. The exact process will vary according to the platform you use for the calculation.
4 Factors to Remember While Stating IDV for Insurance
You must remember the following factors while using the IDV for insurance purposes:
- Do Not State a Lowered IDV
You may be tempted to state a lowered IDV to lower the insurance premium. But if you need a significant claim amount due to an accident, you will be disappointed because a lower insurance premium translates into lower coverage.
- Do Not State a Higher IDV
If you state a higher IDV in your insurance claim, it will increase the premium you have to pay. Unless you need a significant amount under the insurance, you will suffer a loss as the premium you pay will be disproportionate to the coverage you need.
- Do Not State an Incorrect Value
Avoid stating incorrect IDV as it can lead to a rejection of your claim and cancellation of your vehicle insurance policy.
5 Factors That Affect IDV of a Vehicle
Here are some factors which affect the IDV of a vehicle:
- Age of the Vehicle
A key element influencing the Insured Declared Value (IDV) is the car’s age. As a vehicle gets older, its market value tends to decrease. Consequently, an older car will have a lower IDV than a new one.
For instance, two identical models produced in different years will exhibit varying IDVs due to their respective ages.
- Type of Vehicle
Different types of bikes and cars will have varying IDV. For example, hatchbacks are generally more affordable than sedans or SUVs. Thus, the IDV for a sedan will be more than for a hatchback.
- Place of Registration
The area where your vehicle is registered can slightly influence its IDV. This is due to the fact that the ex-showroom prices differ from one city to another.
- Accessories
If you’ve installed any accessories in your car, their reduced value will also be factored into the calculation of your vehicle’s IDV.
6 Final Words
To conclude, the IDV must be specified only when purchasing a comprehensive motor insurance policy. In contrast, a third-party insurance policy does not require an IDV, as it does not provide coverage for damages to your vehicle.
Remember, as time goes on, the market value and IDV of your vehicle will diminish. You can use an online IDV calculator to find out the IDV of your vehicle. Ultimately, you must compare the terms and conditions of different policies to decide which suits you the best.
