What is IDV & How is it determined?

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What is IDV? – IDV is an abbreviation of ‘Insured Declared Value’. It is the sum insured for the purpose of your Car Insurance Policy and is considered at the commencement of each policy period for the insured vehicle. IDV has been decided on the basis of manufacturer’s listed price of a particular vehicle and adjusting current selling price of the vehicle with depreciation percentage as prescribed in the Tariff. It is the maximum sum insured value given to insured on theft, loss or complete damage to the vehicle.

Insurance is a type of investment where policyholder cherishes the returns. Here, buyers always try to have minimum investment and want to enjoy maximum returns. Negotiation is the key to have low premiums. Nonetheless, in such cases, insurance agents may pull down the IDV value of the car without making it clear to the buyer. Regrettably, many times insured comes to know about this at the time of claim.

IDV is fixed depending on age, make and brand of the vehicle. IDV gets decreased for each year at the time of renewal. Insurance Regulatory & Development Authority (IRDA) who regulates the insurance industry in India, has set the IDV of the vehicle as 95% of its ex-showroom price. The rate of depreciation increases with the age of the car. A new car will fetch a high IDV. As the car goes older, IDV goes down with it. This value goes down by 5% within six months. For the one-year-old car, considered IDV is 85% & calculated up to 50% for cars aged four years and more. Buyers need to understand that current market price or selling price of a particular brand or model gets considered and not the price at the time of purchase of the vehicle to compute the IDV.

As explained in the beginning only; lower the IDV, lower will be the claim amount. A little saving over premium by declaring low IDV can turn into a big loss in large claim in an unfortunate event. On the other hand, some policyholders tend to declare high IDV assuming that the claim amount will accordingly increase and it will help them if they sell the vehicle. However, it must be noted that IDV is the maximum possible claim amount that insured will be provided on the loss of vehicle or other significant damages to it. When the claim comes up, the insurer will consider the age of the vehicle and depreciate the value accordingly while settling the claim. As such, one may end up receiving a lower claim amount despite having taken a higher IDV consequently paid a higher premium.

One must take all above things into consideration while declaring the insured declared value. Brand or model and age of the vehicle play an important role in IDV declaration process. Potential insurance buyer should list down these things while in the IDV declaration process in order to have economic premiums with huge claim benefits.

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