Owning a car comes also means you should keep it insured. With the recent strict changes in the traffic rules in India, it has now become essential to have an active car insurance policy bought in place. In general, many people feel confused about several terms related to car insurance, one of which is Insured Declared Value or IDV. If you own a car, you might have heard some people saying that you should change your car’s IDV when renewing car insurance online or offline. Next to these recommendations, not knowing what an IDV is and how it affects the car insurance premium creates even more confusion in the minds of many car owners.
Understanding How A Car’s IDV Varies
IDV, as its literal meaning suggests, is the ‘sum assured’ by an insurance company as per the car policy you have chosen. In an unexpected event, including car theft or its total loss in an accident, IDV is the maximum amount you will get as a result of insurance claim settlement.It depends on the age of your car.
Look at this example – Mr. Sunil bought a car four years ago at the cost of INR 5,00,000. Since vehicles depreciate over time, the current market value of his car has been reduced to around INR 3,00,000, considering 40% value depreciation in four years. At the time of renewing his car insurance policy, the insurer considers this reduced market value to calculate the premium, not its original cost of INR5,00,000.
Now coming to the next question, you may be having in mind –
Is it Possible to Increase the IDV of Your Car?
Since your car’s IDV depends on its age, you cannot say to your insurer that it is brand-new even when it is not. While renewing your car insurance online or through a local agent, the depreciated value of your car becomes its new market value, which is what the insurer will consider.
Some people prefer to choose an IDV lower than the market value of their cars. Since the car insurance premium depends on the chosen IDV, this choice lowers down the premium. Furthermore, it also means that when they file a claim to their insurer, they will get alower compensation amount as defined by their policy limits.
On the other hand, other individuals declare a higher IDV of their cars while buying or renewing their car insurance policy. They pay higher premium assuming that they will get higher claim amounts in case an unexpected event occurs. You are not advised to do this as the chosen insurer may not agree to the higher IDV you want.
The best thing is to opt for an IDV that is near to the actual market value of your car.
Calculate Your Car’s IDV This Way
Every car manufacturer in India shares a listed selling price of all the cars of different makes and models he manufactures. It is on this listed price that the IDV of your vehicle depends. You are advised to calculate the IDV at the time of buying car insurance online or offline and while renewing it at the end of its tenure.
In general, the depreciation to your car’s IDV happens as follows:
| Your Car’s Age | Depreciation in Percentage |
| 6 months | 5% |
| 6 months to 1 year | 15% |
| 1 to 2 years | 20% |
| 2 to 3 years | 30% |
| 3 to 4 Years | 40% |
If you have bought your car five years ago or even before that, its IDV is considered based on mutual agreement between you and your insurance company. Also, your car’s condition, its make and model, and similar other factors are considered while calculating its IDV.
As detailed above, there are many ways to get additional benefits related to the car insurance policy you bought online or offline. Choosing the right IDV for it is one of them. Alongside, it would help if you focus more onselecting the right insurer and a car insurance policy that offers adequate coverage.
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