IDV Calculator

Know the meaning of IDV in insurance and how do we calculate it using an IDV calculator.
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3 mins
12-June-2024

The full form of IDV is Insured Declared Value. It is the maximum amount that an insurance company will pay out in case of a total loss or theft of an insured vehicle.

The IDV in insurance is calculated as - the current market value of the vehicle minus depreciation based on its age and condition.

What is IDV in car insurance?

IDV is the highest amount the insurance provider will give you in case your vehicle is stolen or damaged beyond repair. As such, IDV is an important aspect in terms of motor insurance. The IDV also determines the premium you need to pay while buying an insurance policy for your vehicle.

IDV in car insurance

IDV calculator helps you determine the approximate IDV of your car based on its make and model, age, condition, and current market value. The formula to calculate the vehicle’s IDV in motor insurance may slightly differ for different insurance companies.

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How to calculate IDV for car insurance?

You can calculate your vehicle’s IDV using the IDV calculator. IDV is calculated based on the manufacturer's listed price, depreciation value, and cost of vehicle accessories, if any.

Use the following formulas to calculate the IDV for a new car equipped with additional accessories:

IDV = (Company’s listed price – the depreciation value) + (cost of vehicle accessories - the depreciation value of these parts)

Use the below formula to calculate the IDV if the car does not have any extra accessories:

IDV = Manufacturer’s registered price – the depreciation value

The depreciation value depends on the age and condition of the car. The insurance company follows a standard depreciation schedule based on the age of the vehicle. The applicable depreciation value gets subtracted from the manufacturer's registered price to arrive at the IDV.

Suppose the manufacturer's registered price of a car is Rs. 10 lakh and it is two years old. Assume that the depreciation value is 20%, i.e., Rs. 2 lakh. In this case, the IDV of the car will be Rs. 8 lakh.

IDV in car insurance is an important factor in determining the premium for your car insurance policy as well. A higher IDV will result in a higher premium, while a lower IDV will mean a lower premium. Therefore, use the IDV calculator and choose an appropriate IDV based on the age and condition of your car. This will ensure that you get adequate coverage in case of a total loss or theft.

Points to keep in mind while calculating the IDV of a car

When calculating the IDV, you must keep in mind the following points.

  • Avoid showing a lower IDV to get a lower car insurance premium. This will reduce the coverage amount.
  • Similarly, avoid showing a higher IDV. It will result in a higher premium.
  • Use the IDV calculator and show accurate IDV to get adequate coverage and benefit the most.

What is the importance of IDV in car insurance?

The Insured Declared Value (IDV) is a crucial factor in car insurance policies as it determines the sum insured by the insurer in case of theft or total loss of your vehicle. Here are some of the key reasons why IDV is significant:

IDV calculator

The IDV calculator helps estimate the current market value of the insured vehicle, considering factors like depreciation.

Basis for premium

IDV directly influences the premium amount, with higher IDV resulting in higher premiums and vice versa.

Financial protection

Opting for the correct IDV ensures adequate financial protection against unforeseen events. Settling on a low IDV may decrease the premium but puts you at the risk of inadequate coverage.

Claim settlement

IDV plays a crucial role in claim settlement, ensuring fair compensation for policyholders.

Factors that help determine your car's IDV

The IDV is an important factor in determining the premium of a car insurance policy. Hence, it is essential to choose the right IDV in insurance to avoid overpaying or underinsuring your car using an IDV calculator. The IDV of a car depends on several factors, including:

• Age and depreciation of the car

As the car ages, its value depreciates, and hence, the IDV in car insurance also decreases. The depreciation value of a car increases with its age.

• Make and model of the car

The make and model of the car determine its IDV. Different car brands have different values, even if they are of the same segment.

• Fuel type

The fuel type of the car affects IDV in car insurance. For instance, diesel cars usually have a higher IDV than petrol cars due to their higher selling price.

• Geographical location

The location of the car also plays a role in determining the IDV. Cars located in urban areas may have a higher IDV due to the higher cost of living and higher car prices.

• Modifications and accessories

Any modifications or accessories added to the car will increase its value and reflect on the IDV.

• Condition of the car

The overall conditions of the car, including its mileage, wear and tear, and maintenance, affect the IDV. You can check the IDV by mentioning all these things while using the IDV calculator.

Pros and cons of high/low IDV

Here are the pros and cons of having a high or low IDV:

Type of IDV

Pros

Cons

High IDV

High IDV ensures that you get adequate coverage for the full value of your car.

High IDV results in a higher premium for your car insurance policy.

High IDV increases the resale value of your car.

The insurer will pay a lesser amount in case of a claim because of the high depreciation value.

Low IDV

Low IDV results in a lower premium.

You get coverage amount based on the car’s IDV, which may not cover the car’s full value during total loss or theft.

A lower IDV will cover the current resale value of your car adequately.

You may have a lower depreciation value of the car. The IDV calculator will provide detailed information about the same.

 

Standard car depreciation rate for IDV calculation

The Insurance Regulatory and Development Authority of India (IRDAI) determines the rate of depreciation for motor insurance.

Age of the vehicle

Depreciation for IDV in %

Up to 6 months

5%

6 months – 1 year

15%

1 – 2 years

20%

2 – 3 years

30%

3 – 4 years

40%

4 – 5 years

50%

 
  • For vehicles up to 6 months old: No depreciation applied, IDV in insurance considered as per the manufacturer's selling price.
  • For vehicles between 6 months and 1 year old: The rate of depreciation is 5% of the IDV.
  • For vehicles between 1 year and 2 years old: The rate of depreciation is 10% of the IDV.
  • For vehicles between 2 years and 3 years old: The rate of depreciation is 15% of the IDV.
  • For vehicles between 3 years and 4 years old: The rate of depreciation is 25% of the IDV.
  • For vehicles between 4 years and 5 years old: The rate of depreciation is 35% of the IDV.
  • For vehicles between 5 years and 10 years old: The rate of depreciation is as per the mutual agreement between the insurer and the insured.
  • For vehicles over 10 years old: The IDV is mutually agreed upon between the insurer and the insured.

The vehicle's parts and accessories also have a depreciation value. Choose the right IDV for your motor insurance policy to ensure adequate coverage in case of total loss or theft. Make sure to provide the entire detail of the vehicle while calculating the insured declared value on the IDV calculator.

What are the components of Car Insurance IDV?

The Insured Declared Value (IDV) in car insurance is determined by the following components:

Age of the vehicle

Older vehicles generally have a lower IDV due to depreciation.

Make and model

The brand, model, and variant of the car affect its IDV.

Accessories

Any additional accessories installed in the vehicle can impact its IDV.

Market value/showroom price

The current market value of the car serves as a crucial component of the IDV calculation.

Cubic capacity

Vehicles having engines with higher cubic capacity (cc) have a higher market value. This again has an impact on its IDV.

Depreciation

IDV considers depreciation based on the car's age and condition.

Understanding these components is essential for accurately calculating the IDV using an IDV calculator.

What happens if you choose a lower IDV?

If you decrease the IDV of your car, your policy premium will decrease, leading to savings on your car insurance. But this will also give you a lower coverage amount, resulting in less compensation in case of total loss.

What happens if you choose a higher IDV?

If you choose a higher IDV for your car, the sum insured on the car insurance policy will increase. You will get adequate coverage for your car in case of total loss or theft. Nonetheless, the premium of the car insurance policy will also increase.

Why do you need to care about the car’s IDV?

As mentioned above, IDV impacts on your car insurance premium and its coverage. You get maximum coverage for your car in case of total loss, theft, or repair based on the IDV in car insurance. It also helps you get a good resale value for your car. The higher the IDV, higher the resale price.

Impact of IDV on car insurance policy

The Insured Declared Value (IDV) directly impacts the premium amount in car insurance. Here's how:

Higher IDV, higher premium

A higher IDV implies greater coverage and higher compensation in case of damage or loss, leading to a higher premium.

Lower IDV, lower premium

Conversely, lower IDV results in reduced coverage and lower compensation, leading to a lower premium.

Accuracy in calculation

Using an IDV calculator ensures an accurate assessment of the vehicle's value, enabling policyholders to choose the right coverage level and premium amount.

Balancing coverage and cost

Balancing IDV with premium cost is crucial to ensure adequate coverage without overpaying for insurance.

Understanding the correlation between IDV and premium helps policyholders make informed decisions while purchasing car insurance.

Advantages and disadvantages of decreasing IDV (Low IDV)

Lowering the Insured Declared Value (IDV) of your vehicle can impact your insurance premium and claim amount.

Advantages:

  • Reduced premium: Lower IDV results in lower insurance premiums.
  • Cost-effective for older vehicles: Suitable for older vehicles with lower market value.
  • Savings: Provides a way to save money on annual insurance costs

Disadvantages:

  • Lower claim amount: In case of total loss or theft, the claim amount will be significantly lower.
  • Insufficient coverage: May not cover the actual repair costs in case of major damage.
  • Potential risk: Could be risky if unexpected high repair costs arise from accidents.

Advantages and disadvantages of increasing IDV (High IDV)

Increasing the IDV of your vehicle can provide better coverage but at a higher cost.

Advantages:

  • Higher claim amount: Ensures higher compensation in case of total loss or theft.
  • Comprehensive coverage: Offers better protection for newer or high-value vehicles.
  • Better financial security: Covers more of the repair costs, reducing the financial burden after an accident.

Disadvantages:

  • Higher premium: Leads to increased insurance premiums.
  • Over-insuring: May result in unnecessary high costs without proportional benefits.
  • Diminished returns: Higher premiums may not be justifiable for older or depreciated vehicles.

When should you buy a car insurance policy with a lower IDV?

Opt for a lower IDV when the vehicle is older and its market value has significantly depreciated, ensuring a balance between premium costs and coverage. Use an IDV calculator to determine the appropriate IDV, considering factors such as the age, condition, and usage of the vehicle.

  • Older vehicles: When the vehicle is several years old and has a low market value.
  • Minimal use: If the car is not used frequently, minimising the risk of accidents.
  • Tight budget: When managing insurance costs is a priority over comprehensive coverage.

By understanding the IDV meaning in insurance and utilising tools like an IDV calculator, you can make informed decisions about the IDV in insurance that best fits your financial situation and coverage needs.

Now that you know how to calculate the insured declared value by IDV calculator and how it plays a role in insurance, you can look for a car insurance online. Bajaj Finance Insurance Mall hosts a range of car insurance policies, where you can compare and buy car insurance of your choice. Bajaj Finance offers a 100% buy process, enabling you to buy the policies hassle-free.

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Frequently asked questions

How is IDV calculated?

You can calculate the IDV in two ways. One by selecting the extra accessories, and another without the accessories.
For a new car equipped with extra accessories, you can calculate the IDV in the following way:
IDV = (Company’s listed price – the depreciation value) + (cost of vehicle accessories - the depreciation value of these parts)
If the car does not have any extra accessories, calculate the IDV in car insurance through the below formula:
IDV = Manufacturer’s registered price – the value of depreciation

Why is IDV important in car insurance?

IDV determines the premium and coverage of the car insurance policy. The higher the IDV, the higher the premium and coverage. Therefore, it becomes necessary to calculate the car’s correct insured declared value on the IDV calculator to get the right car insurance policy that meets your requirement.

Can I change the IDV of my car in the car insurance policy?

Yes, you can adjust the IDV as per your requirement. Choosing a higher IDV will result in a higher premium, as you get higher coverage based on the IDV. Similarly, if you choose a lower IDV in car insurance, you will get a lower premium and low coverage. But this may not give you the full value of the car in case of total loss or theft.

What is the difference between IDV and the market value of a car?

IDV reflects the car’s current market value. The IDV in insurance depends on the manufacturer’s selling price of a car as well.

How should I calculate the car’s IDV using an IDV calculator?

IDV in car insurance largely depends on two factors: the manufacturer's selling price and the depreciation value of the car. You can also add the cost of vehicle accessories, if any. The difference between the manufacturer’s selling price and the depreciation value will give you the car’s IDV.

What is the IDV in a car insurance policy?

IDV in car insurance sets the maximum coverage value and the premium. IDV basically indicates the market value of the car.

How does an IDV calculator for commercial vehicles work?

An IDV calculator for commercial vehicles works by collecting information about the vehicle, such as the make and model, year of manufacture, and current market value. The tool then uses this data to calculate the approximate IDV of your commercial vehicle.

What are some of the myths and facts about car IDV for car insurance?

Myth: A higher IDV always leads to better coverage.

Fact: While a higher IDV may seem beneficial, it can result in higher premiums. The optimal IDV balance ensures adequate coverage without overpaying.

Myth: IDV directly affects the claim settlement amount.

Fact: IDV primarily determines the maximum amount an insurer will pay in case of total loss or theft. However, claim settlement also depends on factors like deductibles, depreciation, and policy terms.

Is higher IDV better?

A higher IDV is better as it ensures higher compensation in case of total loss or theft, providing better financial protection but at a higher premium.

Can I claim more than IDV?

No, you cannot claim more than the IDV. The Insured Declared Value (IDV) is the maximum amount the insurer will pay in case of total loss or theft of the vehicle.

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