What Is an Insurance Declared Value (IDV) and How to Calculate It?

which can impact the amount of your premium and what you receive from your insurance claim. By knowing how IDV works, car users can get enough insurance at a good rate. Knowing about insurance will help you prevent spending too much or not having enough coverage. Hence, learning about IDV calculation for car insurance is essential before choosing your policy.

Understanding Insurance Declared Value (IDV)

What Is IDV?

The insurance declared value (IDV) is calculated based on the manufacturer’s listed ex-showroom price of the vehicle, minus depreciation. Based on the car's age, the depreciation follows standard rates approved by the Insurance Regulatory and Development Authority of India (IRDAI). IDV does ignore the registration and insurance costs, yet it could comprise the additional cost of any non-manufacturer-fitted accessories.

Why Should IDV Be Important?

Your insurance premium will be affected by the IDV calculation when getting car insurance. When the IDV is higher, the compensation coverage is better, but you will pay more for the insurance; a lower IDV results in a cheaper premium but means you risk not being fully insured. So you need to understand the balance. Picking the right IDV for lower premiums while still keeping good coverage prevents you from getting less than you are owed or paying more than necessary.

How IDV Affects Claims

If something is lost or stolen entirely, the claim is settled based on the amount shown by the IDV. Therefore, understanding the impact of IDV on claims is essential to making informed decisions while selecting or renewing a policy.

How to Calculate IDV in Car Insurance?

The IDV calculation car insurance process is essential for determining how much compensation you may receive if your car is stolen or suffers a total loss. It is about adjusting the original vehicle cost by a usual rate of depreciation, which grows as the vehicle ages. Here's a detailed breakdown of how insurance declared value (IDV) is calculated:

• Use the Manufacturer’s Listed Price

  The manufacturer will give you the ex-showroom price, where you should begin. The money you pay will be for the car itself and all its original equipment, not for the charges involved in registration or insurance.

• Apply Depreciation Based on Vehicle Age
  • In the first 6 months, the car’s value decreases by 5%
  • 15% of the purchase price can be considered as the depreciation in 6 months to 1 year.
  • Between years 1 and 2, a 20% value is deducted from the vehicle.
  • In the first 2 to 3 years, the item is allowed a 30% depreciation.
  • During the third and fourth years, a 40% depreciation rate.
  • The car value drops by 50% during the fourth and fifth years.

• IDV for Cars Older Than 5 Years

  When a vehicle is 5 years old or older, no fixed plan for maintenance is used. The insurer and the policyholder discuss and agree on the amount of the IDV. When determining this, they consider the vehicle’s age, how reliable it is, its value when sold, its make and model, and how popular similar models are.

IDV vs. Market Value: What's the Difference?

Understanding the distinction between IDV vs market value is crucial when purchasing or renewing a comprehensive car insurance policy. Whereas one shows what you paid for your vehicle, the other is used by financial institutions.   
IDV- The insurance declared value (IDV) is the maximum amount your insurer will pay in case of a total loss or theft of your car. The calculation depends on a fixed schedule for depreciation, which considers the car’s age and the price it had when it was first sold. Insurers use the final measure to set your policy price and determine your claims.   
Market Value- Alternatively, your car’s market value is what someone would pay for in an open sale. The rate depends on a vehicle’s state, its brand’s popularity, place of sale, mileage, and who owned it earlier, and may be greater or less than its IDV.   
Recognising the IDV vs. market value difference helps avoid being underinsured or overpaying for a policy. When you use RenewBuy, the site compares different insurance policies and their IDVs at the same time.

Impact of IDV on Premiums and Claims

Higher IDV:

• They cause insurance companies to charge more money for policies.
• Coverage is increased in case your bike is lost or stolen.
• If a car is new or valuable and the cost of replacing it would be significant, it works well.

Lower IDV:

• Cuts down on the amount you will have to pay for the insurance.
• It may not give you enough money during claims when there is a full loss or theft.
• Meant for older cars that have little value to others.

balanced appraoch

Opting for the optimal IDV for a low premium ensures sufficient coverage without overpaying. You can use RenewBuy’s tools to find the best Insurance Declared Value (IDV) that fits your requirements.

Choosing the Optimal IDV for Low Premium

• Depreciation over time causes older cars to have a lower IDV.
• If the car is not driven very often, a small discount on the IDV could work.
• Possible IDVs provided by different insurers could vary for the same vehicle.
• Don’t choose an IDV that reduces costs if it will leave you with less insurance coverage.

Final Thoughts

Knowing the IDV will help you pick the right car insurance coverage. It can decide how much you will pay in premiums and how much you will be paid in the event of complete damage. By learning how IDV calculation car insurance works and distinguishing between IDV vs market value, you can make more informed decisions. Selecting the optimal IDV for low premium ensures cost-efficiency without compromising coverage. Featuring IDV, several policies to compare, and a support team, makes using RenewBuy an easy experience. RenewBuy will help you find the best insurers and understand your options.