IDV in Car Insurance

How is the Insured Declared Value Calculated?

IDV in car insurance is all about the market value of a car. Your car insurance provider usually calculates the IDV in the following ways:

1. With Accessories
   Cars that have accessories also get IDV coverage for the same. However, the depreciation value of both cars and accessories are taken into account. So, the way of calculating the IDV for cars with accessories can be:
   
   IDV= (Manufacturer’s Selling Price – Depreciation Cost) + (Accessories Cost – Depreciation of These Accessories).
   
   You may see that here, the insurer takes into account the market value of both the car and the accessories and then deducts their depreciation value.
2. Without Accessories
   People who have cars without accessories can get the IDV decided on the basis of the car’s valuation. Here is how your insurer may calculate the IDV for cars without accessories:
   
   IDV = Manufacturer’s Selling Price – Depreciation Cost.
   
   Here, only the car's market value and the depreciation cost are taken into account

What Makes IDV Important?

So far, you may have guessed the importance of correct insured declared value calculation. For more clarity, check out the pointers below that explain why the insured declared value is important:

1. For Compensation
   As discussed above, the insured declared value is the maximum compensation that the policyholder receives if you lose the insured car. It may be either due to an accident or theft. So that the correct calculation of IDV is not compromised. If you do not understand the calculation properly, do not hesitate to ask your insurer as many questions as you want.
2. For Premium
   Did you know that IDV can directly impact the premium charged for car insurance? Yes, the higher the insured declared value of your car, the higher the premium will be and vice versa. Having a low IDV definitely sounds worthwhile when you only think of the premium that you have to pay for the insurance.
   
   However, what if your car suffers damages beyond repair and it can no longer be used? In such a case, the compensation you receive due to low IDV may not be sufficient. So, for the sake of low premiums, do not compromise on the IDV.

How is Depreciation Calculated?

The depreciation value of a car simply refers to the market degradation of a car due to normal wear and tear. Over time, the market value of a sold car decreases since it is being used by the owner. So, a second-hand car costs less than an ex-showroom car. This depreciation cost is also taken into account when the IDV is decided.

IRDAI (Insurance Regulatory and Development Authority of India) decides the depreciation value of cars for insurance policies. Here is how it is calculated:

Conclusion

Insured Declared Value is the market value of your car at the time of purchasing a car insurance policy. IDV, however, also calculates annual depreciation value and deducts the same from the final IDV amount. If you do not understand any term of your car insurance policy, including the IDV, do not skip it. You must ask your insurance provider to explain a clause or term to you so that you can have a proper understanding of the same.

If you are planning to purchase a car insurance policy or already have one, make sure to read the fine print carefully. Skipping pages can only impact your understanding of your car insurance policy in the long run. At Jio Insurance Broking, our team is always there to assist you with car insurance policies. You may easily compare various plans on our website and choose the most suitable one!