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What is IDV in Insurance?
We know there are terms in insurance that are difficult to understand but are extremely important to be acquainted with, one such term is IDV. Guessing the full form, right? We will help you. IDV is Insured Declared Value which is the maximum sum assured that you would receive as compensation for total loss or theft of the insured car. Let’s try and understand this in detail.
What is IDV in Car Insurance?
In very simple language, Insured Declared Value is the market value of your car. It is the sum insured that is fixed by your respective insurance company and will be given to you at the time of loss or theft of your car. Your brand new car will fetch the highest IDV, but as time passes, the rate of depreciation keeps increasing. The insurance company decides the premium of your car based on this value, among others. So, it is important that you affix an accurate IDV.
Suppose the market value of your car fixed is Rs 10 lakh, the insurer at the time of loss or theft will compensate Rs 10 lakh to you.
This is generally fixed right at the beginning and remains unchanged till the end of the policy. There are very few insurer’s providing customization of IDV options to their customers. However, at Digit, we give you a high IDV per rupee and also let you customize your IDV as per your choice.
Why is IDV Important?
Insured Declared Value is the soul of your beloved car insurance. Your IDV decides the premium of your vehicle. There is a direct link between IDV and your premium. If the IDV is high, the premium payable is higher. However, it is not advised that you understate the IDV of your vehicle or in case of damage, it will be your loss.
Get IDV Value of your Car
People often search for the IDV Calculator since it means the amount your car is worth in today’s market. IDV Calculator takes into account some basic information about your car – such as its manufacturer, make and model, the region in which it is registered, its fuel type, cubic capacity, and so on to arrive at the prevailing ex-showroom price. Then, it takes into account the standard depreciation rates of the Indian Motor Tariff for your car. You then put them together, and voila! You’ve got your the Insured Declared Value for your car!
Your car’s value depreciates from the moment you drive it out of the showroom – and the percentage of its depreciation increases with each year. Here’s how your depreciation percentage increases with time:
6 months to 1 year
1 year to 2 years
2 years to 3 years
3 years to 4 years
4 years to 5 years
Understand IDV Calculation with an Example
So, for example, if your car is less than 6 months old and its current ex-showroom price is Rs. 100, the depreciation rate is only 5%. Which means that after its purchase, your IDV drops to Rs. 95 – dropping to Rs. 85 for vehicle age exceeding 6 months but not exceeding 1 year, Rs. 80 for vehicle age exceeding 1 year but not exceeding 2 years, Rs. 70 for vehicle age exceeding 2 years but not exceeding 3 years, and so on – until it is Rs. 50 after 50% depreciation in its 5th year. If your car is more than 5 years old, the IDV depends on the condition of the car – the manufacturer, model, and availability of its spare parts.
How to select the Right IDV for your car?
The Insured Declared Value and your car insurance premium go hand in hand. This means, the higher your IDV is, the higher your car insurance premium – and as your vehicle ages and IDV depreciates, your premium also decreases. Also, when you decide to sell your car, a higher IDV means you’ll get a higher price for it. Price may also be affected by other factors like usage, past car insurance claims experience etc.
So, when you’re choosing the right car insurance policy for your car, remember to make note of the IDV being offered, and not just the premium. A company offering a low premium may be tempting, but this could be because the IDV on offer is low. In case of total loss of your car, a higher IDV leads to higher compensations.
Considered Parameters to Calculate the IDV of your Car
High IDV/ Low IDV
High IDV- High IDV means High premium but you get a higher compensation at the time of loss or theft of your insured car.
Low IDV- Low IDV means low premium but this little saving on the premium can be a big loss for you at the time of loss or theft of your insured car.
At the time of resale, your IDV is indicative of the market value for your car. However, if you have maintained your car really well and is shining as good as new, you can always aim at a price more than what your IDV might offer you. At the end of the day, it all boils down to how much love you have showered on your car.
So, to know what your precious belonging is worth, know the in and out of your IDV!
Explain it like I'm five
We're making insurance so simple, now even 5-year-olds can understand it.
You own an expensive watch. One day, you decide to find out how much you would get if you sold it. You take it to a watchmaker. The watchmaker looks at your watch, and explains that it is made of glass, metal, leather and screws. So, he first adds up the cost of those materials. He then asks you how old the watch is, and you tell him that it is 5 years old. He writes that down as well. Based on all of this, he tells you that if you sold your watch, you would get Rs. 500. In this case, Rs. 500 is your IDV.!