- Date : 18/06/2020
- Read: 4 mins
- Read in हिंदी: आईडीवी क्या है और इंश्योर्ड डिक्लेर्ड वैल्यू क्यों अहम है?
Before you buy a car insurance policy, it’s important to know exactly how its premium is calculated. Understanding the IDV is the first step in doing so.
Car accidents, break downs and repairs can cause a major financial setback if you don’t have the right amount of insurance. In order to be adequately protected, you need a comprehensive car insurance plan with sufficient riders and affordable premium. To do this, you need to know exactly what you’re paying for. That’s where IDV comes into the picture.
Related: Why you should consider long-term two-wheeler insurance
What is IDV?
IDV full form is Insured Declared Value. Simply put, IDV means the current market value of your vehicle. IDV value refers to the highest sum payable by the insurer for a vehicle insurance policy. It is thus the maximum amount you can claim in case of total loss or total constructive loss of your vehicle, or in case it gets stolen or damaged beyond repair, within the policy period.
For instance, if your vehicle’s market value is fixed at Rs. 7 lakhs at the start of the policy, the maximum amount the insurance company will compensate you will be Rs. 7 lakhs.
Calculating IDV value
In order to arrive at the IDV, your insurer uses the following easily available data points, and then adjusts it with the standard deprecation rates as per Indian Motor Tariff:
- Car registration details
- City where the vehicle is registered- available on the registration certificate
- First purchase or registration date - available on the registration certificate
- Current registration type - individual owner or company owned
- Manufacturer, make and model of the vehicle
- Cubic capacity: (auto-populated based on manufacturer and model details)
- Vehicle description: (auto-populated based on manufacturer and model details)
- Ex-showroom price: (the actual price of the car plus the state tax; auto-populated from a database)
Related: Understanding the benefits of the 7 major car insurance riders
How is IDV in insurance determined?
The insurance premium payable is directly proportional to the IDV. Hence, as your vehicle ages, the premium decreases. IRDAI (Insurance Regulatory and Development Authority of India) policy states that the maximum declared value for your vehicle can be 95% of its former showroom price. Hence, within six months of purchase, the value of your vehicle depreciates by 5%.
The depreciated value of your vehicle is arrived at based on the following schedule:
| Age of Vehicle | Depereciation Chart |
|---|---|
| New Car- 1st year | Insurance done at 95% of Ex-Showroom Price. 5% depreciation is deducted |
| on 2nd year renewal | 20% Depreciation is deducted. Insurance done at 80% of original ex-showroom price |
| on 3rd year renewal | 30% depreciation is deducted. Insurance done at 70% of original ex-showroom price |
| on 4th year renewal | 40% depreciation is deducted. Insurance done at 60% of original ex-showroom price |
| on 5th year renewal | 50% depreciation is deducted. Insurance done at 50% of original ex-showroom price |
| 6th year onwards | 10% to 15% depreciation on IDV value of previous year is deducted year on year |
Related: Are you smarter than your insurance agent?
Things to keep in mind while calculating IDV
As explained above, the IDV can fall within a certain range based on the ex-showroom price that your insurer has considered. As the owner of the vehicle, not knowing the correct IDV of the vehicle might result in you receiving inadequate compensation.
It is better not to understate the IDV by quoting a figure that is lower than the actual market value of your vehicle, because though this would mean you may have to pay a lesser premium, it also means you will get lesser insurance cover.
Similarly, don’t overstate the IDV thinking that the claim amount will consequently increase. A higher IDV will not necessarily fetch you a higher price when you are selling your vehicle. Also, please note that while the claim depends on the IDV, it is also influenced heavily by the type of loss.
Now that you are aware of what IDV means and implies, check out 6 Motor Insurance Terms You Must Know Before You Claim.
Looking for some specific information regarding Car Insurance? Let us know in the comments and we’ll get back to you.
Car accidents, break downs and repairs can cause a major financial setback if you don’t have the right amount of insurance. In order to be adequately protected, you need a comprehensive car insurance plan with sufficient riders and affordable premium. To do this, you need to know exactly what you’re paying for. That’s where IDV comes into the picture.
Related: Why you should consider long-term two-wheeler insurance
What is IDV?
IDV full form is Insured Declared Value. Simply put, IDV means the current market value of your vehicle. IDV value refers to the highest sum payable by the insurer for a vehicle insurance policy. It is thus the maximum amount you can claim in case of total loss or total constructive loss of your vehicle, or in case it gets stolen or damaged beyond repair, within the policy period.
For instance, if your vehicle’s market value is fixed at Rs. 7 lakhs at the start of the policy, the maximum amount the insurance company will compensate you will be Rs. 7 lakhs.
Calculating IDV value
In order to arrive at the IDV, your insurer uses the following easily available data points, and then adjusts it with the standard deprecation rates as per Indian Motor Tariff:
- Car registration details
- City where the vehicle is registered- available on the registration certificate
- First purchase or registration date - available on the registration certificate
- Current registration type - individual owner or company owned
- Manufacturer, make and model of the vehicle
- Cubic capacity: (auto-populated based on manufacturer and model details)
- Vehicle description: (auto-populated based on manufacturer and model details)
- Ex-showroom price: (the actual price of the car plus the state tax; auto-populated from a database)
Related: Understanding the benefits of the 7 major car insurance riders
How is IDV in insurance determined?
The insurance premium payable is directly proportional to the IDV. Hence, as your vehicle ages, the premium decreases. IRDAI (Insurance Regulatory and Development Authority of India) policy states that the maximum declared value for your vehicle can be 95% of its former showroom price. Hence, within six months of purchase, the value of your vehicle depreciates by 5%.
The depreciated value of your vehicle is arrived at based on the following schedule:
| Age of Vehicle | Depereciation Chart |
|---|---|
| New Car- 1st year | Insurance done at 95% of Ex-Showroom Price. 5% depreciation is deducted |
| on 2nd year renewal | 20% Depreciation is deducted. Insurance done at 80% of original ex-showroom price |
| on 3rd year renewal | 30% depreciation is deducted. Insurance done at 70% of original ex-showroom price |
| on 4th year renewal | 40% depreciation is deducted. Insurance done at 60% of original ex-showroom price |
| on 5th year renewal | 50% depreciation is deducted. Insurance done at 50% of original ex-showroom price |
| 6th year onwards | 10% to 15% depreciation on IDV value of previous year is deducted year on year |
Related: Are you smarter than your insurance agent?
Things to keep in mind while calculating IDV
As explained above, the IDV can fall within a certain range based on the ex-showroom price that your insurer has considered. As the owner of the vehicle, not knowing the correct IDV of the vehicle might result in you receiving inadequate compensation.
It is better not to understate the IDV by quoting a figure that is lower than the actual market value of your vehicle, because though this would mean you may have to pay a lesser premium, it also means you will get lesser insurance cover.
Similarly, don’t overstate the IDV thinking that the claim amount will consequently increase. A higher IDV will not necessarily fetch you a higher price when you are selling your vehicle. Also, please note that while the claim depends on the IDV, it is also influenced heavily by the type of loss.
Now that you are aware of what IDV means and implies, check out 6 Motor Insurance Terms You Must Know Before You Claim.
Looking for some specific information regarding Car Insurance? Let us know in the comments and we’ll get back to you.
