IDV Meaning and Importance in Insurance: A Complete Guide
2024-12-12 18:19:51Understanding the complex terms in motor insurance can be tricky, especially if you’re buying it for the first time. There are many terms you need to know to fully understand how your plan works. One of these important terms is IDV (Insured Declared Value). IDV plays a big role in motor insurance, as it can affect both your premium (the amount you pay) and your claim.
So, what does IDV mean? Why is IDV so important? How does it work? And how is it calculated? We know you have lots of questions in your mind! But don't worry. In this blog, we will help you understand IDV in car and bike insurance.
What does IDV Cover Mean?
The IDV full form in insurance stands for "Insured Declared Value." It is the amount your insurance company agrees to pay if your car, bike, or other vehicle is stolen or completely damaged. The IDV is decided when you start your insurance policy and is based on the vehicle's current market value, which is usually the price listed by the manufacturer.
In simple words, IDV is the maximum amount the insurance company will pay if your vehicle is stolen or completely lost. It represents how much your vehicle is worth at that time, and if something happens to it, the IDV will decide how much money you will get from the insurer.
How is IDV calculated?
To calculate the IDV of your car, our insurance and IDV calculator uses a special method that considers different factors to find the correct value. But if you want to estimate the IDV yourself, you can use these two simple formulas:
- If you don’t have added accessories: Your car’s IDV = car’s original price – depreciation (value lost over time).
- If you have added accessories: Your car’s IDV = (car’s original price – depreciation) + (cost of accessories – depreciation of the accessories).
How is the Cost of Depreciation Calculated?
Depreciation is an important part of calculating your IDV. It means that the value of your vehicle goes down a little bit every year. This yearly decrease in value is called depreciation. The rate of depreciation is fixed by a rule called The Motor Tariff Act, and it is set as follows:
| Age of the vehicle | Percentage of Depreciation Given by IRDAI |
| Not more than 6 months | 5% |
| More than 6 months but less than 1 year | 15% |
| More than 1 months but less than 2 year | 20% |
| More than 2 months but less than 3 year | 30% |
| More than 3 months but less than 4 year | 40% |
| More than 4 months but less than 5 year | 50% |
If your vehicle is older than five years, the IDV will be decided by both you and the insurance company. This also applies to older models that are no longer sold.
You can also use an online IDV calculator to find out the estimated IDV for your vehicle. The calculator will consider the age of your vehicle and give you an approximate value.
5 Factors That Affect the IDV
The IDV of your vehicle depends on a few things. Here are five factors that you can consider:
- Type of Car: Different kinds of cars, such as hatchbacks, sedans, SUVs, and MUVs, have different values. For instance, the SUV would cost more than a sedan, and the sedans tend to cost more than the hatchbacks. Hence, the type of car you own will affect the IDV.
- Make & Model: Car brand and model also influence the IDV of your car. The value of each car brand varies, despite the same kind of cars, such as hatchbacks or sedans.
- Age & Depreciation: The age of your car is very important during the calculation of IDV. Your car starts losing value immediately after you purchase it, and its age determines how much less it would be. Therefore, an old car would have a lower value IDV than a new one, even if the car types, makes and models are the same.
- Place of Registration: Where your car is registered can also affect its IDV. The price of cars can vary between cities, so the location can play a small role in deciding the IDV.
- Accessories: If you have added any accessories to your car, like a new stereo or seat covers, their value (after depreciation) can be included when calculating your car’s IDV.
What Happens If You Choose the Wrong IDV?
The IDV of your bike affects how much you pay for insurance. If you decide to lower the IDV, here’s what could happen:
- Lower Coverage: amount your bike is insured for will be less. This means if your bike is stolen or completely damaged, you’ll get a smaller claim amount.
- Higher Repair Costs: your bike needs expensive repairs after an accident, you’ll have to pay more out of your own pocket.
- Big Loss: In the end, you may face a large financial loss because your claim amount will be lower.
On the other hand, if you choose a higher IDV, there are some downsides:
- Higher Premium: Your bike insurance premium will be more expensive.
- Claim Issues: Sometimes, if the IDV is too high, it could make it harder to claim for a total loss.
That’s why it’s important to set the correct IDV for your bike. You can do this by carefully checking and comparing different insurance policies before making your decision.
Conclusion
IDV (Insured Declared Value) is the amount your insurance company will pay if your vehicle is stolen or completely damaged. It’s based on your vehicle’s current market value. Choosing the right IDV is important because it affects both your insurance premium and the claim amount you will receive. A correct IDV ensures that you have the right coverage for your vehicle, so make sure to pick it carefully when buying insurance.
What is the IDV value?
IDV stands for Insured Declared Value. It is the maximum amount your insurance company will pay if your vehicle is stolen or completely damaged.
How is IDV calculated?
IDV is calculated based on the vehicle’s current market value, minus depreciation. It also depends on factors like the car's age and model.
Is a higher IDV better?
A higher IDV means more coverage, but it also increases your premium. It’s important to choose an IDV that balances coverage and cost.
What is the IDV after 1 year?
After 1 year, the IDV will be less than the original value because the vehicle’s value decreases over time due to depreciation.
Can I increase my car IDV?
You can increase your car’s IDV, but it will raise your premium. It’s important to ensure the IDV is realistic for your vehicle’s market value.
How can I reduce my IDV?
You can reduce your IDV by choosing a lower value, but this may lead to less coverage and a smaller claim amount in case of a loss.
