When you opt for a comprehensive car insurance policy, you protect yourself from financial losses due to unforeseen accidents and tragedies involving your vehicle. There is a good chance of your car getting significantly damaged due to an accident. At times this damage cannot be repaired, and your car is considered as a total loss.
In the event of your car being stolen or considered a total loss, your insurer will pay you the Insured Declared Value or IDV in insurance. In simple terms, IDV is the amount equivalent to the existing market value of your car.
IDV – Definition
IDV in four-wheeler insurance is the highest amount that an insured individual can claim from the insurer if his/her car is considered a total loss or stolen. Moreover, car IDV value means just the vehicle’s value and accessories; it does not include the cost of registration or insurance.
This value is calculated based on the selling price quoted by the manufacturer from which the car’s depreciation is subtracted.
You can prevent the depreciation from being deducted by opting for the zero depreciation car insurance add-on.
How to Calculate IDV for Car Insurance?
Now that you have a better idea regarding what IDV means in car insurance, let us learn how to calculate the IDV of a car. Multiple parameters are used to determine your car’s fair market value. Using the formula provided below, you can determine the IDV of your car:
IDV = (Listed price by the manufacturer – depreciation) + (Accessories’ cost – accessories’ depreciation)
The rate of depreciation is different for different car ages and models, which ensures the IDV of your car insurance reflects its existing market worth.
On the other hand, you can use the IDV calculator for cars to avoid this complicated calculation. The IDV calculator is an online digital tool that calculates the IDV of your car insurance without going through the manual process and assists you in finding the accurate IDV value for your vehicle.
Is Lower IDV Better?
You should know what car insurance IDV means before you use an IDV value calculator for a car to find out your Insured Declared Value. While it is true that IDV is directly proportional to the insurance premium, it is also vital to know that a lower IDV is not always better.
Some advantages of low IDV include lower premium rates, affordability, and being ideal for older cars. However, there are significant disadvantages to lowering the IDV, which include a reduction in claim amount, inadequate coverage and more financial loss for the insured.
When to Have a Lower IDV?
If you know what car IDV value means, you will also know when you should opt for a lower IDV. Some of the scenarios in which lower IDV is a good idea are:
- If it is not your priority to replace car accessories and parts.
- Your car is old enough to reach the end of its lifespan, and you need to save on the premium.
Conclusion
To ensure that your car is sufficiently covered, you should declare the most appropriate IDV for your car insurance. For this, you can evaluate the market value of your car, get a better understanding of depreciation rates, consider added features/accessories and if possible use a digital IDV calculator. Remember to find an optimum IDV value, which is neither too low nor too high.
Frequently Asked Questions
- Is it better to keep the IDV low or high?
It is best to keep the IDV optimum and neither low nor high. This will ensure you do not incur any loss during an important claim settlement. Keeping the IDV low will lead to a lower amount during claim settlement, and keeping the IDV high will cause you to pay a high premium.
- How to select the most appropriate IDV for your car insurance?
To select the appropriate IDV for your car insurance, research second-hand car prices of the same manufacturing year and model. For your research, you should consider visiting different online portals for cars, where you will find the existing market value of those cars. Through this research, you will find the ideal IDV for your vehicle.
- Is it mandatory to reduce IDV every year?
Yes, it is mandatory for IDV to be reduced every year due to depreciation.
- Why is my IDV value so low?
Some of the common reasons for IDV to be low include the car’s age, its make and model and its depreciation rate.
