What is IDV and how is it decided?
Bike insurance jargon can be a little confusing, especially for the first-time buyer. There are so many terms that one needs to know about in order to understand how a plan works. One of these terms is IDV. This is perhaps one of the most important things in bike insurance - it can affect your premium and your claim experience as well.
What is IDV? How does it work? Why is IDV so important in IDV? How is IDV calculated? We are sure you have all of these questions and more! That’s why we have put together this quick read that will give you a complete understanding of IDV in bike insurance.
What is IDV?
IDV refers to Insured Declared Value and is the maximum sum assured fixed by the insurer that is offered in case of theft or total loss of a vehicle. In short, IDV is the current market value of your vehicle. It is usually estimated based on the manufacturer’s listed selling price of the model and variant of the vehicle (including additional accessories) at the beginning of the car insurance policy. It is determined after adjusting depreciation for every year. In case your four-wheeler is stolen or ends up badly damaged to an extent that it is beyond repair, the car insurance claim amount payable is calculated based on IDV. This is why it is very essential that your vehicle is insured for the right IDV. One should utilize a car insurance calculator for the said purpose.
Why is the IDV of my car important?
There are 2 big reasons why the IDV of your car is important. First, it is the maximum amount of compensation you will receive in case of theft or if your car is damaged beyond repair. Second, the IDV of your car directly affects the premium of your insurance policy. A higher IDV results in a higher premium and vice versa.
With this knowledge, many car owners think about lowering their IDV to enjoy a reduced premium. However, you should note that, in case of theft or total loss of your vehicle, a lower IDV could also lead to a lower payout. This can be extremely disappointing. Therefore it is important you use an IDV calculator and set the correct IDV for your vehicle when buying or renewing your car insurance policy.
Online IDV Calculator:
As the name suggests, an online IDV calculator helps you get a near-accurate estimate of your vehicle’s IDV. To use this tool, all you have to do is get onto the internet, visit our car insurance page and enter a few details about your vehicle. Based on the information you provide, we will tell you the ideal IDV for your vehicle. You can also edit the IDV to your preference!
How is the IDV of your vehicle calculated?
Our insurance cum IDV calculator uses an advanced algorithm to check the IDV of your car. It takes into several factors to accurately calculate the value of your vehicle. However, if you wish to estimate the IDV of your vehicle on your own, you can use these 2 simple formulas:
If you have no added accessories:
Your car’s IDV = car’s ex-showroom price – depreciation.
If you have added accessories:
Your car’s IDV = (car’s ex-showroom price – depreciation) + (cost of accessories – depreciation of the accessories)
How is the cost of depreciation calculated?
The rate of depreciation plays an important role when calculating your IDV. The value of your vehicle reduces a little bit every year. This annual decrease in the valuation of the vehicle is known as depreciation. The rate of depreciation has been standardized & stipulated by The Motor Tariff Act – it is as follows:
Rate of depreciation for car/bike insurance |
|
Age of the car: |
Depreciation in % |
6 months and below |
5% |
6 months to 1 year |
15% |
1 year to 2 years |
20% |
2 years to 3 years |
30% |
3 years to 4 years |
40% |
4 years to 5 years |
50% |
Therefore, if your car is less than 6 months, the IDV of your vehicle will be roughly 95% of its ex-showroom price. Once your car completes 6 months, its IDV will be around 85% of the ex-showroom price. Similarly, the estimated IDV will be 80% of the ex-showroom price for a vehicle that is between 1 and 2 years old – so on and so forth! However, once your vehicle crosses the 5-year mark, the insurance company and the policyholder have to mutually agree on the IDV. If you want to check the IDV of your car, you can use our online IDV calculator instead of racking your brains with all this mental calculating.
5 Factors that affect the IDV of your vehicle:
The IDV of your vehicle is decided based on several factors, some of these include:
Type of car: There are different types of cars available in the market. These include hatchbacks, sedan, SUVs, MUVs, etc. Each of these types of cars will have a different value. For example, SUVs tend to have a higher value than sedans. Similarly, sedans usually have a higher value than hatchbacks. Therefore, the type of car is one of the first factors that influence the IDV of your car.
Make & model: The make and model also play an important role in deciding the IDV of your vehicle. This is because different car brands have different values, even if they are the same types of car (i.e. hatchback, sedan, etc.).
Age & depreciation: This is one of the most important factors when calculating the IDV of your vehicle. Your car starts to depreciate as soon as you drive it home from the dealership. And, the older it gets, the more it depreciates in value. Therefore, an older car will have a lower IDV as compared to a new one, even if it is the same type, make and model of car.
Place of registration: The location where your car is registered also plays a minor role in deciding its IDV. This is because the ex-showroom price varies between cities.
Accessories: Lastly, if you have added any accessories to your car, then their depreciated cost can also be included when calculating the IDV of your vehicle.
Our car insurance cum IDV calculator takes all these factors into consideration and provides you with a quick estimate of your vehicle’s value. All it takes is a few details and a couple of seconds of your time– you will have the IDV of your car on your screen.
What happens if I choose a lower IDV?
Our car insurance calculator also doubles-up as an online IDV calculator. By using it, you can quickly check the value of your car. Moreover, our calculator also allows you to edit the IDV as per your preference. You can lower the IDV of your car in the quotation provided. However, this will have a direct effect on the premium of your plan. Changing the IDV will also affect the payout of your policy in case of theft/total loss of your vehicle.
Let’s take a look at what happens in case you lower the IDV of your car.
-The premium of your policy will reduce
-This will help you save money on your car insurance policy
-However, the sum insured your policy will be reduced
-Therefore, you will receive less compensation in case of Total Loss
What happens if I choose a higher IDV?
Our online IDV calculator also allows you to increase the IDV of your car. You can choose a higher IDV in your quotation and enjoy the benefits the come with it. Let’s take look at what happens in case you increase the IDV of your car.
-The sum insured of your policy will increase.
-This higher sum insured can be extremely helpful in case of a total loss
-However, the premium of your car insurance policy also increases.
When is the IDV payable?
Claims that involve the IDV of your vehicle are quite rare. However, it is still important to set the right IDV when you buy and renew a car insurance policy. This will ensure that your premiums are in-check with the valuation of your car. But more importantly, it will ensure that, in case your IDV is required for the calculation of a claim amount, you will receive fair & satisfactory compensation. Here are some instances where the IDV of your vehicle is payable:
Theft of the vehicle: This is one of the most common claims where the car’s IDV is payable. Theft is considered a total loss and therefore the insurance company has to provide the current market value (IDV) to the insured. This compensation will help offset the financial impact of the stolen vehicle.
Total loss of the vehicle: The other kind of claim where the IDV of the vehicle is payable is when the repair cost exceeds its insured value. Such damage could be a result of an accident, an act of God such as earthquakes or a man-made calamity such as riots. Here, the insurance company will provide the policyholder with the IDV of the vehicle. This will help reduce his/her contribution towards the purchase of a new vehicle.
FAQs about IDV:
What is the IDV of a new car?
The IDV of a new car can be estimated as its ex-showroom price minus the depreciation cost of the vehicle. However, for a more accurate calculation of a car’s IDV, you can use our car insurance calculator. It doubles up as an online IDV calculator by providing a quotation wherein the IDV is indicated and can be increased or decreased as per requirement.
Can I get complete compensation without depreciation?
Yes, you can opt for the return to invoice or new vehicle replacement add-on. This will cover the price gap between the IDV & the on-road price of your new car.
Does the IDV for commercial and private vehicles differ?
The IDV of a vehicle depends on its type, it market value, its age & rate of depreciation, and accessories. Whether it is a commercial or private vehicle does not really matter. You can use our online IDV calculator to check the IDV of your commercial or private vehicle.
