Insured Declared Value (IDV)

Well, you get into looking for car insurance plans, and suddenly, BAM! You come across this term: IDV. This might look like another one of those complicated shortened terms that you can ignore, but bear with me, understanding what IDV is could save your wallet and make you much better at deciding on your insurance. Well, get ready to sit down and let us explain all of this because we are going to do it in a way that is understandable and doesn’t make you yawn.

What is IDV? 

Okay, let me begin with the simplest information. The acronym IDV is for Insured Declared Value. In simple terms, it is the top dollar your insurance company will compensate you if your vehicle is stolen, or damaged beyond economical repair following an accident. It is the value of your old car today, less any depreciation that has taken place. Understanding what IDV is important because both your premium payment as well as the amount received in the event of losses depend on this.

How is IDV Calculated?

Good question! Here’s the deal. IDV has arrived at the goods manufactured price of your car (ex-showroom price), which is subtracted by depreciation. As the age of the car increases the actual value of the car depreciates due to vulnerability to mechanical faults, hence the IDV continues to reduce as the years progress. The fixed depreciation chart which is used by the insurance company is used to calculate this value.

Here’s a quick look at how depreciation affects IDV:

Up to 6 months old: 5% depreciation

6 months to 1 year: 15% depreciation

1 to 2 years: 20% depreciation

2 to 3 years: 30% depreciation

3 to 4 years: 40% depreciation

4 to 5 years: 50% depreciation

In case your car is above five years, the IDV is usually arrived at through some negotiation between you and the insurer of the car depending on the condition of your car and the market price of such a car.
Why Does IDV Matter?

As you understand What is IDV, you may turn your attention to why matters so much. It is the main element of your vehicle insurance. Here’s why:

It Affects Your Premium: They found out that when the IDV is high, people are forced to pay high insurance premiums. On the other hand, the lower the conception of independence, the lower the premium it will attract.

It Determines Your Claim Amount: For a comprehensive or completely wrecked car or if the car is stolen, then, the insurance company pays as per the declared IDV. Hence if you have set it lower, you will earn less and this is not what anybody who setting the prize money would wish.

Strikes a Balance: You don’t wish the IDV to be very high because the insurance premium will be very expensive yet you also don’t wish the IDV to be very low since the claim amount will also be very low. Getting the balance right yet again, forms the most critical component.

Common Mistakes People Make with IDV

Alright, let’s be serious for once, what if you are wrong? Not knowing What is IDV can lead to some big mistakes, like:

Opting for a Low IDV to Save Money: Of course, your premium will cost less, but I would regret it if something happens and the claim you get is not enough to replace what got lost.

Choosing an Unrealistically High IDV: This simply means that you will be featured in an extremely high-risk category than you ought to be and so you are forced to pay exorbitant premium rates. Not worth it.

Ignoring IDV During Renewal: Many people even when they are renewing their insurance don’t even worry about checking their IDV. Big mistake! Of course, always read and edit it if necessary.

Strategies on How to Set the Right IDV

Here’s how to make sure you’re getting the right IDV:

1. Do Your Research: Before you lock the make and model of your car at the IDV, ensure that you determine its current market value.

2. Don’t Lowball It: Of course, it lures to reduce the IDV in order to get low premiums, however, this badly Backs you at the time of claim.

3. Review Every Renewal: Depreciation varies from one year to the other and therefore it is important always to refer to the IDV at the time of renewal.

4. Ask Your Insurer for Advice: Almost every insurance provider will assist you in finding the sweet.
What happens through IDV the is set is wrong or incorrectly:

That will mean that if your IDV is low you will end up getting little claims that can hardly replace your car. On the other hand, if it is high then one will be paying a lot in premiums. In any case, it’s a no-win situation. That is why there is nothing like not understanding ‘What is IDV’ and therefore setting it properly is of paramount importance.

IDV vs. Market Value: What’s the Difference?

Some of the questions thinkers always ask are whether or not IDV is the same as the market value. The short answer? Not exactly. While IDV serves as the car’s initial market value in the event of an insurance claim, it is a little lower herein since it factored depreciation. The idea of IDV is to define the assessed value of your car as an acceptable representation of a car’s market value in the eyes of the insurer.

What is IDV in car insurance?
Here are 05 key points that explain what IDV (Insured Declared Value) is in car insurance:

1. Definition: What is IDV or Insured Declared Value IDV is simply the agreed or pre-determined amount of money that the insurance company will require the car owner to pay in the event of a total loss or theft of the car. It could be the stated amount of money for which the policyholder wants to be compensated or the total amount that the insurer is willing to pay to the policyholder should a claim arise.

2. Calculation: IDV is determined by subtracting the depreciation on the vehicle from the manufacturer’s listed selling price of the vehicle. It generally depends on the age of the car, and it can be deducted where the company or individual has a fixed percentage to deduct from the depreciation amount every year.
3. Factors Affecting IDV: A huge discount is offered based on the age of the car, make or model, cubic capacity, and location where the vehicle is registered. The IDV also includes any other accessories or fittings installed in the car apart from the standard fittings.

4. Importance: IDV under a car insurance policy often has significant importance as it decides the maximum claim amount under the policy in case of theft or loss. Policyholders should therefore verify that the IDV of their vehicle should be correct in order to reduce any future disputes or losses.

5. Renewal and Revision: The IDV of a vehicle is generally restored at the time of policy renewal and is adjusted according to the Anticipated Depreciation of the vehicle in the outgoing one year. Policyholders may also negotiate a change in the IDV based on its current value in the market, which might differ from the previous value.

Secondly, we will read about Bike Insurance After discussing car insurance What is IDV in bike insurance?
Here are 03 key points that explain what IDV (Insured Declared Value) is in bike insurance:

1. Definition: IDV is the short form of Insured Declared Value and this is the highest limit a two-wheeler insurance company will compensate in the case where the two-wheeler is stolen or totally damaged. It is also referred to as the face amount or any limit which represents the quantum of money, which the insurer is willing to pay to the policyholder in the course of processing any claim.

2. Calculation: Companies use the IDV in arriving at the manufacturer’s list selling price of the bike subtracting the depreciation factor. The depreciation depends on the age of the bike and normally is allowed to decrease in percentage every year. For instance, if a firm has a new bike, then the depreciation rate would be high at 5 – 10 % per year while for a used bike, the depreciation rate would be higher.

3. Importance: IDV has a drastic role in bike insurance since it identifies the highest possible sum for which the policyholder will be reimbursed in the event of damage or theft. While a lower IDV may mean lower premiums, that means that the policyholder will get a relatively smaller payout in the event of a claim. Thus, there is a need to ensure that the identification value (IDV) arrived at is apt so that it has the right value and is as current in the market as possible to help avert such losses.

Here’s an example of how the IDV might be calculated:
– Manufacturer’s Listed Selling Price: ₹500,000
– Age of the Vehicle: 2 years
– Depreciation Rate: 25%
IDV = 500,000/- – (0.25 x 500,000/-) = 375000/-

It is important to keep in mind that the IDV may be different for every insurance company but will depend on the policy form written.

Conclusion

And, of course, by now, you’re almost an expert in what is IDV (welcome!). It is, therefore, important to know about IDV while making decisions on the vehicle insurance policy. It influences your premium rates, adjustments in claims, and even your wallet. Therefore, the next time you are in the process of renewing the policy or purchasing a new one you should look into your IDV carefully. Not just a run-of-the-mill number, that is the code to safeguard one of your biggest assets. Happy insuring and have a nice driving!