Insured Declared Value (IDV) is a crucial term in vehicle insurance, particularly in comprehensive car and two-wheeler insurance policies. IDV represents the current market value of your vehicle and is the maximum sum insured amount that your insurance provider will pay out in the event of a total loss or theft of your vehicle.
How is IDV Calculated?
IDV is calculated based on the manufacturer’s listed selling price of the vehicle (including accessories) minus depreciation. The depreciation rate depends on the age of the vehicle, as outlined by the Insurance Regulatory and Development Authority of India (IRDAI). Here’s a general overview of how depreciation is applied:
- New Vehicle: 95% of the ex-showroom price
- 1 Year Old: 80% of the ex-showroom price
- 2 Years Old: 70% of the ex-showroom price
- 3 Years Old: 60% of the ex-showroom price
- 4 Years Old: 50% of the ex-showroom price
- 5 Years Old: 40% of the ex-showroom price
For vehicles older than 5 years, the IDV is determined through mutual agreement between the insurer and the insured.
Importance of IDV in Vehicle Insurance
- Claim Settlement: The IDV is the maximum amount you can claim in case of total loss, theft, or damage beyond repair. A higher IDV means better financial coverage.
- Premium Calculation: The IDV directly influences your insurance premium. A higher IDV results in a higher premium, while a lower IDV will reduce the premium cost.
- Depreciation Coverage: Over time, the value of your vehicle depreciates, which affects the IDV. Some policies offer zero depreciation add-ons, ensuring that you get the full claim amount without depreciation deductions.
Choosing the Right IDV
It’s important to select the right IDV for your vehicle:
- Too Low: If you opt for a very low IDV to save on premiums, you might face financial loss in case of a claim.
- Too High: While a high IDV offers better coverage, it also means paying a higher premium, which may not be necessary for an older vehicle.
Conclusion
Insured Declared Value (IDV) is a critical component of your vehicle insurance policy, determining both your premium and the coverage amount in the event of a total loss or theft. It’s essential to choose an appropriate IDV that balances adequate coverage with an affordable premium. Always review your IDV at the time of policy renewal to ensure it accurately reflects your vehicle’s current market value.
For more insights and expert advice on vehicle insurance, visit PolicyGuide.in—your trusted source for all things insurance.