What is IDV in Insurance?

The term IDV (full form- Insured Declared Value) is the current market value of your vehicle. Simply put, IDV in insurance refers to the maximum amount your insurance provider will pay you in case of the total damage or theft of your vehicle. IDV is calculated by taking into account the manufacturer’s selling price for the vehicle minus the depreciation.

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IDV in Car Insurance | Bajaj MARKETS

What is IDV in Insurance?

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Insured Declared Value

In the unfortunate event of theft or damage to your vehicle, the Insured Declared Value (IDV) is used to decide the maximum amount you can file an insurance claim for. To put it simply, the IDV is the maximum sum assured that you can get as a vehicle insurance policyholder. Hence, it is vital that you declare the exact Insured Declared Value amount in order to ensure the claim settlement goes smoothly. Once the claim is verified and settled, the insurance company ensures that the insured is compensated for the current market value of their vehicle. Note that this is not the same as the resale value of the car.

How is IDV Calculated?

The insurance company determines your vehicle’s Insured Declared Value by checking the selling price listed by the vehicle manufacturer, the brand, model and age of the vehicle. Then, the selling price is adjusted to account for the depreciation of the vehicle due to wear and tear to get the true IDV of the insured vehicle. You can also get some of your vehicle’s accessories insured as well, but if these are additions made by you and not the original manufacturer, a separate Insured Declared Value will be calculated for them. Remember that the insurance and registration costs of the vehicle are not included in the IDV calculation.

The insurer and the insured are required to come to a mutual agreement regarding the insured vehicle’s Insured Declared Value. Tools like Bajaj MARKETS’ online IDV calculator have made it very easy for policyholders to know the real IDV of their vehicles, thus making claim settlement stress-free and quick.

Depreciation Schedule for Fixing IDV

In order to get a good estimate of how Insured Declared Value is determined, you can refer to this depreciation schedule used to calculate the Insured Declared Value of your vehicle:

Age of the Vehicle

Rate of Depreciation (for IDV)

Up to 6 months

5%

6 - 12 months

15%

1 - 2 years

20%

2 - 3 years

30%

3 - 4 years

40%

5 years

50%

Factors That Help Determine the IDV

To fully grasp what IDV in insurance entails, you need to understand the factors that it depends on. Here are the main factors that help determine the Insured Declared Value:

 

  • Age of the vehicle:

The age of your vehicle is a significant factor; the older your vehicle the lower the Insured Declared Value as the depreciation rate will be higher.

  • Make and model of the vehicle:

The brand and model of your car or bike plays a role in determining the repair expenses in case it gets damaged. So vehicles made by BMW will have higher IDV than vehicles made by Hyundai.

  • Depreciation rate:

The market value of your car begins depreciating the minute you buy it. The aforementioned depreciation rate schedule is used to calculate your Insured Declared Value.

  • Geographical area:

The state or city where your vehicle is registered is another factor. The IDV for vehicles registered in urban regions will be different from the Insured Declared Value for those in more remote areas.

Impact of IDV on Your Bike or Car Insurance Policy

The Insured Declared Value of your vehicle is a crucial determinant of how much your insurance policy will cost you and what your coverage will look like. The higher the car or bike Insured Declared Value, the greater the insurance premium and the same is true for lower IDV and lower premium. Now, it might seem like setting your Insured Declared Value low will be beneficial for you, but you should avoid falling into this trap. Whilst a lower IDV may result in lower premiums, it will also mean that should something happen to your vehicle, the insurance coverage will be less than what the vehicle’s market value is, which is a negative for you.

 

Declaring the exact Insured Declared Value is essential to get an accurate estimate of your own-damage cover premium. You can use the IDV calculator offered by Bajaj MARKETS to get a clear sense of this.

 

Summarizing IDV in Insurance

What is IDV in Insurance

IDV for Older Vehicles

As the insured vehicle gets older, the premium of the damage cover goes on decreasing according to depreciation.

For vehicles that are aged 5 years or more, the Insured Declared Value depends on

 

  • The brand/manufacturer

  • Vehicle model

  • Availability of spare parts

The older a vehicle is, the more important it is that the insurer and insurance seeker discuss and come to a mutual agreement on the IDV.

Advantages and Drawbacks of Higher & Lower IDV

Here is a quick glance at the advantages and disadvantages of a lower or higher Insured Declared Value for your vehicle:

Type of IDV

Pros

Cons

Low IDV

Lower premium

Lower compensation for total damage, theft or loss of vehicle

High IDV

Higher compensation for total damage, loss or theft of vehicle

Higher premium

 Conclusion

When you buy a new car or two-wheeler, you want to keep it safe and secure. Hence, buying motor insurance is not only legal compliance in India, but it is also a very useful shield for your finances and your precious vehicle.

 

Presenting the right Insured Declared Value is necessary for avoiding claim rejections. You can buy motor insurance online with Bajaj MARKETS, and avail yourself of benefits like a fast claim settlement, cashless claims and network garages in all parts of the country. 

FAQs

  • ✔️How is the IDV in insurance calculated?

    IDV in insurance is calculated by taking into account the car/bike manufacturer’s listed selling price minus the depreciation value of the vehicle. The vehicle registration and insurance costs are not included in the IDV.

  • ✔️How important is IDV for car insurance?

    The IDV or Insured Declared Value of your car is an important determinant of your car insurance premium. Your vehicle’s IDV is directly proportional to your car insurance premium. Higher the IDV of your vehicle, the higher the car insurance premium. However, you must not set your car’s IDV at a lower value as it will affect your sum assured in case of total damage or theft of your car.