Insured Declared Value (IDV) in car insurance and its importance.

For any new or used car to be legal in India, it needs to be covered under a valid car insurance policy. Apart from that, the mere fact of knowing that your car is insured against any unforeseen event will give you peace of mind. While purchasing or renewing a car insurance policy, you pay a certain amount as a premium to the insurance company. There are various factors that decide the premium amount of your car insurance policy, and IDV or Insured Declared Value is one of the most significant factors.

What is an IDV (Insured Declared Value)?

Insured Declared Value (IDV) is the sum insured of the vehicle at the beginning of the policy. It is the maximum amount that policyholder will get when they make a claim on car insurance policy. Simply, it is the current market value of your car. If your car is stolen or gets severely damaged to an extent where it is beyond repair, the car insurance claim amount payable to you by your insurer is then calculated based on IDV. Hence, it is crucial to insure your car with the right IDV.

The IDV can be calculated with the following formula:

IDV (Insured Declared Value) = Ex-showroom price – Depreciation %

What are the factors that affect the IDV of your car?

The IDV of a car is usually calculated based on the following key factors:

• Type of car:

Cars come in various types, from hatchbacks to sedans and SUVs etc. Therefore, the IDV calculated for each type differs from the other. Generally, SUVs attract higher value than sedans, and sedans have a higher value than hatchbacks.

• Make and model:

The make and model can be a deciding factor for calculating IDV since higher-end cars have higher IDV than lower-end cars due to the difference in repair and maintenance costs.

• Depreciation:

Depreciation is a decrease in the car's value due to wear and tear. As soon as you take the car out of the dealership, it starts depreciating. Hence, an older car has a lower IDV than a new car.

Other factors that may affect the calculation of an IDV can be -Place of registration, Accessories, Age of the car etc.

Why calculating the right IDV is important?

There is a direct correlation between the IDV of your car and your car insurance premium. The higher the value of IDV, the more will be the amount of premium. For old cars, the IDV is usually lower, therefore the low amount of the premium.

However, it is crucial that you calculate the right amount for IDV, as opting for a lower IDV just to reduce your cost of the premium is not advisable, as it may prove to be non-beneficial and result in a loss if your car is stolen or meets with an accident and is totally damaged, the insurance company will only pay you the amount of IDV decided at the beginning and as per other policy conditions.

Hence, it is highly recommended to calculate the IDV of your car properly while buying or renewing your car insurance policy. Choosing the IDV that is near the market value of your car is advisable.

In conclusion

It is essential to understand the role of IDV in determining the cost of premium of your car insurance policy while purchasing or renewing it. Buy or renew a car insurance policy with Zurich Kotak General Insurance, and choose the one that suits your needs from various insurance products and services.

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