Why High Vehicle IDV Value is Important?

The Indian motor vehicle industry is booming, thanks to the presence of several world-renowned brands in the sector. In fiscal 2020, 2.7 million passenger cars were sold. A motor insurance policy is mandatory in India for all such vehicles operating on the nation’s roads.

Is a basic insurance plan all you require to protect your investment?

Perhaps this is why you need to consider the Insured Declared Value for a motor insurance plan before purchase.

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What is Insured Declared Value (IDV)?

Also known as IDV, Insured Declared Value, refers to the amount derived after subtracting the depreciation factor from a vehicle’s manufacturer listed price.

In practical terms, IDV can be defined as the maximum compensation that you are liable to receive from your motor insurance policy in case the insured vehicle undergoes irreparable damage or theft.

An important factor to remember here is that IDV only applies to your policy if it includes Own Damage cover as well. Thus, policyholders of third-party liability insurance plans do not benefit from IDV in any way.

But, is your Insured Declared Value fixed?

Can I Increase or Decrease the Vehicle IDV Value?

Insurers in India allow individuals to customize the Vehicle IDV. You can change this value in one of two ways:

Increasing the IDV amount - You can choose to acquire substantial compensation when your car or bike undergoes damage beyond repair. To do this, you can speak with your insurance provider, asking them to hike the insured declared value. Still, doing so would result in a marginal increase in the own damage premiums linked with your plan.
Decreasing the IDV amount - If the base value is too high and you want to lower it, you can do so as well. Speak with your motor insurer regarding such a change. However, doing so will limit the claim amount you are liable to receive after the loss of the vehicle in question. The only reason to initiate a reduction in your base IDV is to lower the premium rates for your motor insurance policy.

While deciding one way or another, you must understand that own damage premium is just 2-3% of the IDV. Thus, increasing or decreasing the insured declared value does not lead to an immense change in your premiums. To ensure maximum financial security, keeping your policy’s IDV as high as possible is recommended.

What are the benefits you ask? Let us see!

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Why is it Important to Choose High IDV Value?

You should increase the IDV for your beloved car or bike if you want to protect your financial investment on the same. If you are still not convinced, here are three scenarios where substantial insured value can benefit you:

1. Financial Assistance when the Vehicle suffers Massive Damage in Accidents

While minor accidents may result in a broken tail light or cracked windshield, severe road mishaps can leave your car/bike’s engine totalled.

When such a thing happens, you cannot simply get the same repaired at your nearby garage. In all likelihood, such extensive damage tends to be permanent, leaving you without a vehicle.

If your policy IDV is high, you can use the substantial compensation from your insurer to finance the purchase of a replacement car/bike at such times.

However, individuals who decrease their IDV may need to avail fresh auto loans to afford another vehicle.

2. Financial Compensation in case of Vehicle Theft

Expert drivers often make the mistake of lowering policy IDV simply because they are sure of never being involved with serious accidents.

However, the one thing they forget to take into account is that their cars or bikes are just as likely to be stolen as anybody else’s is.

If you own a high-end model, theft is a major risk for your vehicle. Moreover, if you have an open parking space, the chances of theft are even higher.

A higher IDV can assist you in case of car or bike theft as well. With the claim amount you acquire from your insurance company, you can plan the purchase of a replacement vehicle.

3. Mental Peace

Besides the monetary assistance, policies with high IDV can also keep your mind free from worry. Even if your beloved vehicle is involved in a major road accident, or you suffer from its loss due to theft, this extensive claim amount will minimise your financial loss.

Thus, such policyholders do not need to stress about these unforeseen events, which are beyond their control.

As one can clearly perceive, keeping the IDV close to or more than the market value of your car is the best bet. If you lower it any further, the compensation from the insurer may not be sufficient to acquire a replacement vehicle.

One should focus on his/her financial security instead of deciding the IDV based on policy premiums alone.

Slightly higher premiums may help you make the most of your motor insurance policy in the long term!

Frequently asked questions

All

How is base IDV calculated for a vehicle?

Insured Declared Value is calculated based on two main factors, namely, the manufacturer’s listed price of the car or bike and the depreciation value for a vehicle.

Depreciation refers to the natural wear and tear of auto parts, which gradually lower the vehicle’s overall value. Thus, IDV is the manufacturer’s listed price minus the depreciating factor for the concerned four-wheeler or two-wheeler.

How can you determine own-damage policy premium based on the IDV amount?

Most insurers charge a certain percentage of a car’s IDV as yearly premiums for the OD cover. In most cases, this percentage tends to range between 2 and 3% of the entire IDV value.

Thus, if an own-damage insurance policy’s IDV is Rs.5 lakh, its premium would be between Rs.10000 and Rs.15000. Keep in mind that this is just the OD premium. You would also need to bear the premium for third-party liability insurance alongside this amount.

Can you use the IDV compensation to initiate repairs to the insured vehicle in garages?

Policyholders can only claim IDV payout when the insured vehicle is damaged beyond repair. Therefore, if your car or bike is still in repairable condition, you cannot file for an IDV claim from your insurer. IDV payment is also applicable in case someone steals the insured car or bike.

Do you need to purchase the same model as a replacement with IDV amount?

Insurance providers do not compel you to use IDV in any way. You are free to use this sum in any way you please. Most individuals who suffer from loss of their vehicle tend to utilise this claim amount to acquire another vehicle.

You are free to decide whether you want to stick to the same model of car or bike or opt for a different one this time around.

Need Help?

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