What is IDV in Car Insurance and how is it Beneficial ?
Having a vehicle is a great asset for your household. However you need to keep the asset protected from mishaps. Car accidents, repairs and totaled damage to the vehicle can result in a huge financial setback, if you don’t have the correct amount of insurance. In order to be effectively protected, you need to have a car insurance plan with a premium that is within your budget. And to have this, you need to know what exactly you’re investing in.
This brings IDV to the fore.
What is IDV in Car Insurance?
IDV is Insured Declared Value. It is the highest sum assured set by the insurance company which is provided when the vehicle is totaled or stolen. IDV is the current market rate of the vehicle, if in case the vehicle is totally damaged then the IDV is reimbursed by the insurance provider to the policyholder.
Basically, IDV is calculated as per the manufacturer’s planned selling price minus the depreciation. The registration and insurance price are not included from IDV. So, it is recommended to get IDV that is closer to the car’s market value price. The range of the difference is 5% to 10%. The lesser the IDV, the lesser would be the premium.
Importance of IDV
- IDV determines the amount of the car insurance premium that a policy holder pays.
- The exact value of the car is also determined, which is paid out to the owner in case of theft or totaled damage.
- Many times, people knowingly put incorrect estimates to lower their IDV, however that turns out to be a profitless decision in the long run.
- Insurers don’t consider the car’s market value; instead, they see the IDV value of the vehicle and accordingly pay out claim in case of theft or total loss.
- An ideal IDV is close to the car’s market price.
- Initially, it seems like an investment, but in the long run, the benefits compensate for the initial expenses.
- The correct IDV value of car mentioned while purchasing the car insurance policy will be an advantage in the long run.
Can IDV be increased?
Changing the IDV is a mutual decision between the policyholder and the insurance company. While this is possible, the more important question is by how much should the IDV be increased or decreased. Let’s explore this answer in the next section below.
What are the advantages of increasing IDV?
Some policyholders will look to go for a higher IDV. They think that this will fetch them a better compensation in case of claim and command better resale value. However this is not always the case.
Other policyholders tend to go for a lower IDV to decrease premiums. But this also means that in case of a totaled damage or theft, the reimbursement value would also be lower, which will result in a loss.
The best option would be to keep the IDV as close to the market value as possible. If this means increasing the IDV from its present levels then do go for it. This way, even if your premiums are higher, you will be reassured in the fateful case of totaled loss or robbery.