Fascinating Facts About IDV in Car Insurance
Insured Declared Value (IDV) is the current market value of your car. This is the actual value that the insurance provider can reimburse to the insured in the event of a claim, i.e., in the event of a total failure (where the car is no longer worthy of driving on the road), a total constructive loss (where the overall cost of the vehicle's recovery and/or rehabilitation is more than 75% of the IDV) or theft of the car.
IDV is the maximum value insured in the case of a loss that the insurer decides to pay you. In other words, the estimated current market value of your insured vehicle is IDV. Based on the IDV, in the event of the complete loss of the vehicle, the insurance provider agrees on the car insurance claim settlement amount it would disburse. A constructive total loss is when the loss is more than 75 percent of the IDV because of an accident or in a situation where the vehicle has been stolen.
How is IDV Calculated?
The IDV is determined based on the vehicle's "current selling price", the model, and the age of the vehicle. The older the engine, the lower the IDV. The "current selling price" of the vehicle is taken into account when the insurer determines the insurance of the vehicle using the IDV formula and not the money paid on buying the vehicle. For instance, if the car that was purchased in 2014 was priced at INR 10 lakh, but now costs INR 8.5 lakh, the IDV would be decided on the current sale price of INR 8.5 lakh.
When measuring the IDV of the vehicle, the extra accessories mounted in the vehicle after the purchase are also taken into account as an addition to the car price. And the cost of such items is applied to IDV in the case of any devices that are not factory equipped, such as speakers or music devices, as the pricing of such items is extra to the price of the vehicle. As these products may have experienced some wear and tear over a duration of time, they are also adjusted for depreciation.
IDV = {[Ex-showroom price+Sales Tax+Accessories that are not included in listed selling price–depreciation]–Depreciation+Registration costs+Insurance costs}
IDV Calculation for More Than 5 Years
The IDV is based on the condition of the car and its age for cars over 5 years of age or which have become outdated. When it comes to determining the IDV of the car insurance scheme, a contractual arrangement is made between the insurer and the insurance policyholder. The age of the vehicle, the state of the vehicle, the miles completed are some of the factors that decide the car insurance IDV. Knowing that the IDV depreciates with the age of the vehicle is significant. It is not advisable to carry out a costly insurance policy on a vehicle above 5 years of age.
Declaring a Lower/Higher IDV than Market Value
There have been instances where persons have reported higher or lower IDV when taking car insurance than the market value of a car. This is why people go for a lower IDV as they wish to pay lower premiums. In the event of an accident, one will have to shell out of their wallet for extra costs over the insurance claim in such a scenario. At times, when paying out insurance, individuals have also reported a higher IDV than the market value of their vehicle. The age of the vehicle and the depreciation rate result in one having a lower claim payout during the claim settlement process, in spite of claiming a high IDV while taking out the car.
Bottom Line
IDV is one of the main considerations that insurance companies weigh when determining the premium on your auto insurance. Therefore, if you buy the insurance for the first time or get your car insurance policy renewed, ensure that your car's IDV is in line with your car's age and model to eliminate any unpleasant surprises during claims.
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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
