Does IDV Matter in Car Insurance?

Buying a car is still a dream for many in India. So when you finally live your goal, it becomes essential to safeguard your plan with adequate and appropriate insurance. It is mandatory to have third-party insurance as per law. Besides, it is advisable to have your own damage insurance so that you are safe as far as your finances are concerned in case of an accident. Now a policy that combines both third-party insurance and own damage cover is comprehensive. Still, an important question that arises is what is the sum insured in the insurance policy that we take? And is it possible to buy car insurance online? The sum insured is decided on the basis of IDV which stands for Insured Declared Value. And it is a matter of choice whether you decide to opt for car insurance online or offline but it is easier to compare various offerings online before finalizing the one to opt for.

What is Insured Declared Value?

Insured Declared Value (IDV) is the highest amount an insurer agrees to pay in case of theft or total loss of the insured vehicle. Essentially, it represents the vehicle's current market value. In the event of a total loss, the IDV determines the compensation the policyholder will receive from the insurer.

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

Age of car	Depreciation rate
Not exceeding six months	5%
More than 6 months but not exceeding 12 months	15%
More than 1 year but not exceeding 2 years	20%
More than 2 years not exceeding 3 years	30%
More than 3 years not exceeding 4 years	40%
More than 4 years not exceeding 5 years	50%

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.

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

From the various types of motor insurance on offer, the policy which has its current market value nearest to the policy’s IDV, is best suited for you as it will give you the best protection if anything happens to your car. Hence, it is imperative to know what is IDV in insurance in order to set the correct value for your vehicle for optimal premium rates.

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.