Cracking the Code: How to Use an IDV Calculator Effectively

By Megha Jain, Content Writer  |  Tuesday, 07 May 2024, 04:29 Hrs


Cracking the Code: How to Use an IDV Calculator Effectively

Car insurance can be complex, with many factors influencing your policy. One such factor is Insured Declared Value (IDV), which plays a crucial role in determining coverage and premiums. In this guide, we'll simplify the concept of IDV calculation and explore how to effectively use an IDV calculator when buying or renewing your car insurance.

Whether you're new to insurance or a seasoned buyer, this blog aims to provide practical insights to help you navigate the process with confidence. Let's dive in and unravel the mysteries of IDV together.

What is Insured Declared Value (IDV)?

Insured Declared Value or IDV is a term you're likely to encounter while looking for insurance policy for car or bike. But what exactly does it mean? IDV refers to the maximum sum insured by your insurance company that you're entitled to receive in case of total damage or loss of your insured vehicle. In simpler terms, think of IDV as the current market value of your car.

But how is IDV calculated? Car insurance companies use a formula:

IDV = (Manufacturer’s Registered Price – Depreciation) + (Accessories Purchased - Depreciation)

The manufacturer's price forms the baseline, from which depreciation based on the car's age is deducted. This leads us to another critical component: depreciation.

Depreciation refers to a car's value loss due to age and wear and tear. Here's a quick look at how depreciation rates align with your car's age:

Age of Car

Depreciation Rate for Calculating IDV

Under 6 months

Nil

6 months - 1 year

5%

1 year - 2 years

10%

2 years - 3 years

15%

3 years - 4 years

25%

4 years - 5 years

35%

5 years - 10 years

40%

Above 10 years

50%

Now, you might think, why not reduce my car's IDV to lower my premium? While decreasing your IDV might save you money on premiums now, it could also mean receiving a lower claim amount in case of damages. In short, when it comes to IDV, it's about striking the right balance between affordable premiums and ample coverage. An IDV calculator can help crack this balancing act, but more on that soon!

The Advantages of an Accurate IDV in Your Auto Insurance Policy

Understanding the nuances of your insurance policy for car is crucial to ensure you reap maximum benefits. The advantages of using the IDV accurately are as follows:

  1. Financial Protection: An accurate Insured Declared Value (IDV) ensures adequate compensation in case of theft or total loss.
  1. Premium Optimisation: Avoid overpaying by accurately valuing your vehicle, leading to fair premiums.
  1. Claims Settlement: Facilitates smoother claims settlement processes, reducing disputes and delays.
  1. Asset Value Representation: Reflects the true market value of your vehicle, ensuring appropriate coverage.
  1. Avoid Underinsurance: Prevents underestimation of your vehicle's worth, avoiding insufficient coverage.
  1. Legal Compliance: Maintains compliance with insurance regulations, avoiding penalties for underreported values.
  1. Peace of Mind: Knowing your vehicle is accurately insured provides peace of mind on the road.

How to Use an IDV Calculator Effectively

Using an IDV calculator doesn't have to be a daunting task. Let's walk through the steps together:

  1. Enter Vehicle Details: The first step is to enter your vehicle's details, including its type and model. For example, if you have a Honda City, select 'Honda' as the brand and 'City' as the model.
  1. Input Purchase Information: Enter the city where you purchased your car. This accounts for location-based price variations.
  1. Specify Car Age: Your car's age affects its depreciation rate, so it's crucial to input this information accurately.
  1. List Car Accessories: If your car boasts any additional accessories not included by the manufacturer at purchase, list them here.

After these steps, the IDV calculator will compute your vehicle's Insured Declared Value. For the most precise results, remember to be as accurate as possible with your inputs.

Final Thoughts

Comprehending the IDV and utilizing an IDV calculator effectively is essential when purchasing or renewing a car insurance policy, yet it's often overlooked. This oversight can stem from various factors, including a lack of understanding about how IDV impacts coverage and premiums, or simply not realizing the significance of accurate valuation in insurance policies. However, by recognizing the importance of IDV and the benefits of using a calculator, you can make more informed decisions that align with your insurance needs

At ACKO, we offer simple and transparent insurance for car and bikes, allowing you to control your coverage. Say goodbye to tedious paperwork and form-filling—we've streamlined the process so you can buy or renew your insurance instantly with just a few clicks.

Disclaimer: Vehicle insurance is a mandatory requirement as per The Motor Vehicles Act, 1988. Non-compliance can lead to monetary penalties and legal issues. Thus, make sure to buy vehicle insurance and keep the policy active by renewing it before its expiry date. You can buy/renew vehicle insurance easily, quickly, and conveniently via the ACKO website/app for a hassle-free insurance experience.

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