Importance of IDV in Car Insurance

Insured Declared Value: What Exactly Is It? 

A four-wheeler’s IDV (Insured Declared Value) is the amount insured at the start of the car insurance. A policyholder will get the maximum amount if they file a claim under the car insurance plan. Simply said, it’s the car’s current market worth. Suppose your four-wheeler is stolen or seriously damaged to the point that it cannot be repaired. In that case, your insurance provider will determine the value of your four-wheeler insurance claim based on the Insured Declared Value. As a result, it is critical to insure your vehicle with the appropriate IDV.

Why Does Insured Declared Value Matter in Four-Wheeler Insurance? 

If you’re wondering, “Why does IDV matter in four-wheeler insurance?” the following are the reasons why the IDV is important in four-wheeler insurance:

• Insured Declared Value determines the coverage and hence the premium quote for car insurance. Regarding four-wheeler insurance, a higher Insured Declared Value indicates more coverage and a more significant premium amount. The IDV continues to shrink, and low IDVs imply low premiums.
• If the vehicle sustains damage, the insurance provider will estimate the expenses. Then, when acquiring the policy, they disburse the amount based on the damage and the Insured Declared Value. They pay the entire IDV in the event of a total loss of 75% damage.
• A higher Insured Declared Value suggests a bigger risk because the four-wheeler has a higher market value.

Sometimes an agreement is reached between the insurance provider and the insured to undervalue the four-wheeler. As a result, the Insured Declared Value for four-wheeler insurance is reduced. The insured individual agrees to pay lower rates while the insurance provider offers more insurance.

How Is Insured Declared Value Calculated for a Four-Wheeler? 

The IDV is computed by subtracting the car’s market value from its depreciation expenses. It also considers the depreciation value of any add-on items if the vehicle has them. The IDV formula in a four-wheeler insurance calculation is as follows:

It will take into account the manufacturing company’s declared market pricing. It is the ex-showroom price less depreciation. Because a new four-wheeler loses 5% of its value in the first six months, the Insured Declared Value in car insurance rises to 95%.

IDV = Market Price Stated by the Company – Depreciation Costs

The Insured Declared Value for older four-wheelers are computed similarly. It takes into account the same aspects that new four-wheelers do. It is based on the manufacturers’ present market worth and depreciation over time.

IDV = Present Market Worth – Depreciation Value

• Extra Accessories in the Four-Wheeler

The insurance provider will consider the depreciation cost if you add accessories to your four-wheeler. Four-wheeler insurance adds these parts’ depreciation and market values to the Insured Declared Value. It makes no difference whether the four-wheeler is new or used. If the vehicle is new, the depreciation expenses of these extra items are minimal. The depreciation value, on the other hand, climbs as the four-wheelers age.

IDV = {Present Market Worth Stated by the Manufacturing Company – Depreciation Costs} – {Accessory Costs – Depreciation Value of the Parts}

When you renew your old four-wheeler, ensure your insurer receives the correct IDV in car insurance. Though the depreciation value of the four-wheeler should be significant owing to the increased number of years, you might bargain with the insurer. You can request that the depreciation value be reduced upon renewal. You can negotiate an increase or decrease in the specified IDV of up to 15%. The IDV in car insurance varies depending on the insurer. Also, when you renew the vehicle and replace the accessories, ensure that the correct depreciation values are entered into the Insured Declared Value.

Factors Affecting Insured Declared Value in Four-Wheeler Insurance 

The IDV in four-wheeler insurance is affected by the following factors:

• The car’s manufacture, manufacturer, and model
• The car’s age is determined by the registration date.
• The city of registration is essential for IDV in four-wheeler insurance. Because market prices change in different states and cities, the IDV varies.
• Cars owned by individuals or business.

The depreciation value of the four-wheelers over time is shown in the table below:

Years	Depreciation (in %)
For a maximum of six months	5%
Over six months but not more than a year	15%
Over one year but not more than two years	20%
Over two years but not more than three years	30%
Over three years but not more than four years	40%
Over four years but not more than five years	50%

Note: Surveyors/car dealers determine the depreciation value over five years based on the condition of the vehicle. The insurance coverage varies from one insurer to the next. The insured can negotiate the policy’s restriction and maximum cap.

Conclusion

Hence, it is clear that the all-important Insured Declared Value in four-wheeler insurance determines the maximum coverage amount. It’s the exact sum that the insurance provider will pay or compensate for four-wheeler theft or significant damage. It refers to the monetary worth of your four-wheeler. As a result, it is critical to do the proper IDV computation when renewing or purchasing your four-wheeler insurance plan. Selecting an IDV close to your vehicle’s market value is best. 

Also, you can use an online car insurance premium calculator to know the factors influencing your car insurance premium for a more informed decision. You can find this feature on the official websites of leading insurance providers in India, like Tata AIG and others. It will help you in selecting the insurance policy that best meets your needs.