What Is Insured Declared Value (IDV) and Why Does It Matter in Car Insurance?

If you really want to understand the calculation of Car or bike insurance policy premiums, you will have to understand the idea of Insured Declared Value. Repairing, accidents, and breakdown of cars can lead to maximum stress on your financial health. If you want to make sure that you have taken sufficient amount of cover to cope with such situations, you’ll have to understand Insured Declared Value (IDV) of vehicles.

IDV can be taken as the present market price of your vehicle. Insured Declared Value is the maximum Sum Insured against which a car insurance company would compensate when a claim is filed in case of any loss or damage to your vehicle or theft of your vehicle.

How Is IDV Calculated?

In order to calculate the Insured Declared Value of your vehicle, Auto Insurers generally make use of the following factors. Thereafter, they adjust it with standard depreciation rates as prescribed under the Indian Motor Tariff Act.

• City where your car is registered as per the registration certificate of your vehicle.
• The date of the first purchase or registration mentioned on the registration certificate.
• Registration details of the vehicle
• Details of Car manufacturing company and model of car
• Cubic Capacity (CC) of the car
• Registration type i.e. if it is privately owned or company owned vehicle.
• Vehicle Description
• The ex-showroom price of the vehicle

Insured Declared Value Calculation Formula

IDV = (Manufacturer’s Listed Vehicle Price – Depreciation) + (Accessories that not included in Listed Price – Depreciation)

What Is the Relation Between Insured Declared Value and Car Insurance Premium?

You should know that the Vehicle Insurance premium is directly proportional to the Insured Declared Value (IDV). Therefore, as your vehicle ages, the premium for the vehicle goes down and so does the IDV. As per the Insurance Regulatory and Development Authority of India (IRDAI), the highest declared value for the vehicle can only be 95% of its showroom price. Therefore, just 7 months after buying, the market value of your car depreciates by 5%.

A Number of Things to Consider While Calculating IDV

The Insured Declared Value of a vehicle can be in a number of ranges depending on the ex-showroom cost taken by the insurance provider. Being the owner of a vehicle if you do not know the correct Insured Declared Value (IDV) of your vehicle then it could result in you getting insufficient compensation.

It’s very important that you do not understate the IDV of your vehicle even though you might pay a lower premium. But at the same time, you would get a depleted motor insurance cover.

You should also not overstate the IDV of the vehicle under the idea that the auto insurance claim value will increase. A higher Insured Declared Value will not guarantee you a higher price when you are selling it. Motor insurance claims are settled not only on the basis of IDV but also on the basis of the type of loss.

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