Does IDV Matter in Car Insurance?

Buying the right motor insurance for your vehicle is a crucial part of owning a vehicle. According to Section 146 of the Motor Vehicles Act, 1988, the owner of a vehicle is required to have a third-party liability insurance policy. This allows them to have support when they have caused harm to another’s property However, if one wants enhanced coverage that allows one to get coverage for their own vehicle as well, opting for a comprehensive coverage is advisable. When doing so, you must know what to expect from a policy, by understanding it well. Motor insurance is a type of policy that is not permanent. It offers coverage for a limited duration and requires regular renewal. When renewing your policy, it is essential to have a clear idea of the terminology and the primary factors that determine the details of your policy. One of the most important considerations when buying or renewing your vehicle insurance is IDV.

What is IDV?

While people who have across motor insurance may recognise the term IDV, it is important to also know the Full Form of IDV and  why it is an important aspect of your motor insurance policy. This may help you understand your policy better . IDV is an abbreviation for the term “Insured’s Declared Value”. The IDV of your car, bike, or any other vehicle is deemed to be the Sum Insured for the purpose of tariff calculation and it is usually fixed at the commencement of each policy period for each insured vehicle. The IDV is fixed on the basis of the manufacturer’s listed selling price of the particular model of the vehicle.* The IDV is fixed on the basis of the manufacturer’s listed selling price of the particular model of the vehicle at the commencement of the policy or at the time of renewal of the vehicle insurance policy. IDV is treated as the “Market Value” throughout the policy period without any further depreciation for the purpose of Total Loss (TL)/Constructive Total Loss (CTL) claims.*

Importance of IDV in Car Insurance

Car insurance is essential for protecting your vehicle against unforeseen events. IDV in insurance stands out as a crucial factor among the many aspects of a car insurance policy. But what exactly is IDV, and why does it matter so much? IDV stands for Insured Declared Value, the maximum sum your insurer will pay if your car is stolen or completely damaged beyond repair. Simply put, it represents the current market value of your car, factoring in depreciation. This makes understanding what is IDV critical for every car owner. Unlike the purchase price, the IDV reflects the car’s depreciated value, which decreases over time. The insurance IDV full form highlights its role as a valuation metric in car insurance policies. It serves as the baseline for your policy’s coverage and premium calculations. Choosing the right IDV ensures you neither overpay for your premium nor receive an inadequate claim amount. The IDV value means more than just a number; it determines how much you can claim in case of a total loss. Here’s why it matters:

1. Claim Settlement

IDV directly impacts the amount you receive during a claim. A higher IDV ensures better financial recovery.

2. Premium Costs

A higher IDV means a higher premium, while a lower IDV reduces the premium but might leave you underinsured.

3. Policy Transparency

Understanding what is IDV in car insurance helps you make informed decisions about your coverage.

How to Calculate IDV for Car Insurance?

At Bajaj Allianz General Insurance Company, the Insured Declared Value (IDV) of your vehicle is determined based on the manufacturer’s listed selling price of the brand and model of the car you propose for insurance. This value is then adjusted for depreciation according to the following schedule:

1. Not Exceeding 6 months: 5% depreciation
2. Exceeding 6 months but not exceeding 1 year: 15% depreciation
3. Exceeding 1 year but not exceeding 2 years: 20% depreciation
4. Exceeding 2 years but not exceeding 3 years: 30% depreciation
5. Exceeding 3 years but not exceeding 4 years: 40% depreciation
6. Exceeding 4 years but not exceeding 5 years: 50% depreciation

For vehicles older than 5 years, we recommend speaking with a Bajaj Allianz General Insurance Company representative to determine the appropriate IDV, ensuring that your car’s value is accurately reflected in your policy. Also Read: Insured Declared Value (IDV) In Motor Insurance

How is Insured Declared Value Decided?

For a new car, Insured Declared Value is the ex-showroom price listed by the manufacturer. Depreciation shall apply every passing year. Depreciation on a newly purchased car is 5% so the maximum IDV of your car shall be 95% of the ex-showroom price. It should be noted that the time you get your car out of the showroom, the IDV reduces and a car of 5 years old can be depreciated up to the rate of 50%. The schedule showing depreciation rate is shown below

If the age of the car is more than five years, then the value of the car for insurance is decided mutually between the insurance company and car owner.

Why Does IDV Matter in Car Insurance?

If you have a question about, “Why does IDV matter in car insurance?” Here’s the answer: IDV is the maximum amount of claim that can be put forward by the owner of the car in regards to the insured vehicle. If the IDV is more, then it is possible to claim a higher amount on the occurrence of an accident or other claimable events. It is possible to have a higher IDV for a car beyond the age of 5 years as the IDV in those cases is decided mutually between the two parties. The IDV mutually decided usually varies more or less up to 15%.

Does Insured Declared Value Affect Insurance Premium?

Insured Declared Value has a direct relation with the insurance premium. Generally, the insurance premium is 2%-3% of the IDV. Hence higher IDV implies higher insurance premium. So if you want a lower premium, it is safe to opt for a lower IDV value. But this also means that you will have a lower sum insured, and you might not be paid in full if your claim amount exceeds the sum insured.

Factors Affecting IDV in Car Insurance

Several factors influence your car’s IDV, including:

1. Car’s Age: Older vehicles have a lower IDV due to depreciation.
2. Depreciation Rates: Cars depreciate annually, reducing their market value.
3. Model and Make: Luxury and premium models typically have higher IDVs.
4. Condition and Accessories: The inclusion of additional accessories increases the IDV.
5. Market Trends: Demand for specific models can affect resale value and, consequently, IDV.

Understanding these factors can help you make better choices when setting the IDV during auto vehicle insurance policy purchase or renewal.

When Will I Be Paid the Full Insured Declared Value of My Car?

There will be two situations when you can get the full amount of the sum insured. First is when your car is stolen. If your vehicle is stolen, then after a long search and police documentation, the insurance company will honor your claim with the full amount. The second situation is when your single claim amount exceeds 75% of the sum insured. If your single claim amount exceeds 75% of IDV, the insurance company shall assume it as a full loss situation and pay you the full amount. It is important to remember that here you will be liable to pay the total deductible amount.

How to Choose the Right IDV for Your Car?

Selecting the correct IDV requires balancing adequate coverage and reasonable premiums. Here’s how:

1. Avoid Undervaluation: A low IDV might save on premiums but could result in insufficient compensation during a claim.
2. Avoid Overvaluation: Setting a high IDV inflates your premium without significant benefits.
3. Use an IDV Calculator: Bajaj Allianz General Insurance Company offers tools to estimate IDV, simplifying your decision-making process.
4. Consult Experts: Bajaj Allianz General Insurance Company can guide you in determining the optimal IDV for your car.

How Does IDV Affect Car Insurance Renewal?

When renewing your car insurance, revisiting the IDV is vital. Here’s how it impacts your renewal:

1. Premium Adjustment: IDV directly affects your premium. Lowering it reduces the premium but risks under insurance.
2. Claim Coverage: Updating the IDV ensures you’re adequately covered for the car’s current value.
3. Customisation: Bajaj Insurance General Insurance Company allows you to adjust the IDV during renewal, giving you control over your policy.

When renewing your policy with Bajaj Allianz General Insurance Company, it's essential to reassess your IDV to ensure adequate coverage. A lower IDV can reduce premiums and result in lower claim settlements. Consult with Bajaj Allianz General Insurance Company to determine the optimal IDV for your vehicle and secure comprehensive coverage.

What Happens If You Increase/Decrease Your Car’s IDV?

Adjusting the IDV has pros and cons:

1. Increasing IDV

1. Pros: Higher claim payouts in case of total loss.
2. Cons: Increased premiums.

2. Decreasing IDV

1. Pros: Lower premiums.
2. Cons: Reduced claim amount, which might be insufficient to replace your car.

Knowing how these adjustments affect your policy helps you make informed choices.

When Should You Have a Low & High IDV for Your Insured Car?

The ideal IDV depends on your car’s age, usage, and condition:

1. High IDV

1. Newer cars benefit from a higher IDV, ensuring better claim coverage.
2. Beneficial for high-value cars with expensive replacements.

2. Low IDV

1. Older cars nearing the end of their lifespan can have a lower IDV to save on premiums.
2. Suitable when the replacement cost is not a priority.

Things To Remember

The IDV is one of the important aspects of your policy. As a policyholder, it may be advisable for you to be aware of what your IDV is, and what it may mean for you when making a car insurance claim. Moreover, you would also know what to expect during your next car insurance renewal, based on how old your car is.* Here are a few key things to remember about IDV in car insurance.

1. The right IDV declaration means a better chance of an appropriate claim for the vehicle. Claims are subject to terms and conditions set forth under the motor insurance policy.
2. The IDV can be one of the factors influencing your premium costs. While a lower IDV may mean a lower premium, it would also mean a lower claim amount. 
3. An IDV calculator can help you ensure that you know what IDV to expect from your policy. You may also consult your insurance provider for further clarity.
4. If the aggregate cost of the repair or retrieval of the vehicle exceeds 75% of the total IDV, the insured car will be treated as Constructive Total Loss (CTL).

To put it more simply, IDV is the Sum Insured value of your car insurance policy. One of the most important factors your IDV depends on is the age of your vehicle. Beyond the age of 5 years (of your car), the IDV can be discussed with your insurance provider. An IDV calculator may help you get estimates. Before you buy a policy, ensure that you are aware of all the necessary policy details.*

FAQs

Can I claim car insurance more than once within a single policy year?

Yes, it is possible to claim car insurance more than once in a given policy year provided the amount of total claim has not exceeded the sum insured.

How much IDV should I keep for my car?

You should keep your car’s IDV close to its current market value. This ensures fair coverage during theft or total loss while balancing your insurance premium cost effectively.

What IDV should I choose?

Choose an IDV close to your car's current market value. It ensures adequate coverage without overpaying premiums, offering fair compensation in case of theft or total loss.

Can I modify the IDV during the policy period?

No, the IDV remains fixed for the duration of the policy. Adjustments can only be made during renewal.

How is the IDV determined for an older car?

For older cars, IDV is calculated based on market trends and a standard depreciation rate, with additional consideration for vehicle conditions and accessories.

Does IDV affect the claim amount I receive after an accident?

Yes, the IDV sets the maximum payout for total loss or theft claims. A lower IDV reduces the compensation.

Should I select the highest IDV for my car insurance?

Not necessarily. While a higher IDV ensures maximum claim payouts, it also increases premiums. Balance is key.

How does IDV differ from market value?

Market value reflects the car’s selling price, while IDV is the insurer’s valuation after depreciation.

Can I change my car’s IDV at the time of policy renewal?

Yes, Bajaj Allianz General Insurance Company allows you to adjust the IDV during policy renewal, giving you flexibility in customising your coverage. * Standard T&C Apply Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.