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What is IDV in Car Insurance?

By Finserv MARKETS - Feb 5,2019
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IDV in Car Insurance

Most car owners in India know that as mandated by law and under the Motor Vehicles Act of 1988, every vehicle on Indian roads has to be insured for a third party liability insurance cover. Hence, when you purchase a car from a dealership, you are also advised to buy a car insurance policy along with it.

Having said that, it is highly recommended that you buy a comprehensive car insurance policy as opposed to only third party liability cover as it protects against both, damages caused to the third party as well as to yourself.

Here, consider this table to have a better understanding of third party car insurance and comprehensive car insurance.

Third-Party Liability Car Insurance Comprehensive Car Insurance
Coverage against any loss or damage to the third party due to a collision or an accident Coverage against personal accident, third party liability, injury or damage due to an accident
According to law, it is compulsory to have a third-party insurance It is not mandatory as per the law but is highly advisable to have comprehensive car insurance in place
Damages arising from natural calamities are not included Natural disasters, theft and accidents are covered

Your car insurance plan is an important document. It helps you when you need coverage in the event of an unfortunate road mishap. Therefore, it is advisable that you thoroughly understand the terms and conditions listed in your plan.

One of the major deciding factors when purchasing a car insurance policy is the premium amount that is to be paid. The approximate value of your premium payable is provided in your insurance quote, and an essential factor in determining the same is the IDV or Insured Declared Value.

Let’s Explore What IDV Is and Why Is It Important

What is IDV?

Various factors go into determining your insurance premium. One such factor is the insured declared value or the IDV of your car. In simpler terms, IDV implies the current market value of your vehicle. You cannot skip this component in your car insurance plan.

Let us take an example if you buy a car today for Rs. 10 Lakhs, its value after three years will undoubtedly be less than this amount as a car is a depreciating asset. Once you start using your vehicle, its monetary value gradually decreases on account of regular use. Therefore, three years after you have bought a car, its value will probably be around Rs. 5-6 Lakhs. This amount (the current market value) is called the IDV of the vehicle.

In simple words, IDV is the sum assured amount agreed by the insurer in case you make a claim. The claim compensation offered is quite similar to the market value of your car at the given time. So, in case your vehicle incurs any damage due to accident, the IDV is paid as the sum assured.

Moreover, IDV also helps determine your insurance premiums. The premium amount paid covers several clauses in your car insurance plan and includes IDV. So, approx. 2-3% of the amount goes towards IDV.

How is IDV Calculated for Car Insurance?

An insurance company uses standard available data to ascertain a car’s insured declared value. Following parameters are taken into account when your car’s IDV is calculated:How is IDV Calculated for Car Insurance?

  • Age of the Vehicle:

After you have purchased a car, in the first year of use, insurance coverage is typically provided at 90% to 95% of the car’s ex-showroom price. Whereas, in its fifth year of use, insurance coverage is usually offered at 50% of the car’s original ex-showroom price.

  • Manufacturer Structure and Model of the Vehicle:

The size, shape and cubic capacity of your car are also considered when determining its current market value. A bigger car usually requires a larger premium amount.

  • Vehicle and the City Registration Information:

Your car registration details are available on your registration certificate. Moreover, the city where your car is registered has an impact on its insured declared value. The IDV of your car in a metro city may be less than its IDV in a tier-II city.

  • Extra Car Accessories:

The cost of any extra car accessories, not fitted by the manufacturer, is also taken into consideration. The cost of it is calculated separately at an additional amount if insurance is necessary for those components.

The standard rates of depreciation by the Motor Tariff Act are as follows –

Age of the car IDV Percentage
Up to 6 months 95% (of ex-showroom price)
6 months – 1 year 85%
1-2 years 80%
2-3 years 70%
3-4 years 60%
4-5 years 50%
5 years + Needs negotiation

Why is IDV Important?

While calculating car insurance premium, the IDV of a vehicle usually falls within a certain range considered by your insurer based on the vehicle’s ex-showroom price. Therefore, not knowing the IDV of your car may result in you paying an incorrect premium amount.

Also, in case of an unfortunate incident/damage/ theft, you might end up receiving a lesser amount than you should be due to incorrect IDV. Hence, it’s important not to understate or overstate the IDV of your car. Doing this will hamper the insurance coverage (sum assured) that you need.

Now that you know why IDV is important for your bike, read about what is IDV in car insurance.

How To Buy a Car Insurance Plan at Finserv MARKETS?

To purchase car insurance with us, just follow these simple steps –

  1. Choose the type of coverage you need
  2. Fill in the application form – personal as well as vehicle details
  3. The application submitted with be assessed by the insurer and the documents will be verified
  4. Complete the payment process
  5. Receive your car policy in no time

The Bottom Line

Whether you are purchasing a used car or a new car, you still have to know what the insured declared value of the vehicle is. In case you are looking for a reliable platform to buy a car policy, get in touch with us, and we’ll help you get a plan that’s suitable for you.

The Bajaj car insurance available on Finserv MARKETS have round the clock assistance, claim settlement wallets, cashless services at network garages, and so much more. So, why wait? Get your four-wheelers insured with us, right away!

Also, read about ncb in car insurance to know if you are eligible for a discount while renewing your policy.

Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we works towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522