IDV Versus The Resale Value Of A Car

Understanding the finer details of a car insurance policy lies in simplifying the relationship between the Insured Declared Value (IDV) and the resale value of your vehicle. Although seemingly related, these two values stand for different things and play distinct roles in auto insurance.

To begin with, let's understand what these terms mean.

What is IDV and Resale Value?

The IDV is the maximum amount your insurer will pay in case of total loss or theft of your car. It is calculated by subtracting the depreciation from the manufacturer’s selling price. On the other hand, the resale value estimates your car's worth in the market if you sell it today.

Now that we've defined these terms, let's move on with our exploration. An IDV calculator is a reliable online tool to help you arrive at an accurate IDV for your vehicle.

How is IDV calculated?

IDV is a significant contributor to the premium of the insurance policy for car or bike. To calculate IDV, start with the manufacturer’s listed selling price and deduct depreciation. The depreciation rate depends on your car’s age according to a schedule specified by the India Motor Tariff.

Here's a table summarising the depreciation rates according to the age of the car:

For cars over five years old, the final IDV is determined by mutual agreement between you and your insurer, considering factors such as the car's condition, model, and the condition of its spare parts.

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.

Co-relation Between IDV and Resale Value

The IDV and resale value are interconnected because they influence your insurance premium and potential payout in case of theft or total loss. Setting a high IDV means a higher premium and a higher payout if your car is stolen or severely damaged. However, striking a balance is essential; an excessively high IDV relative to your car's resale value may not justify the increased premium.

Let’s illustrate with an example:

Consider two identical three-year-old cars, Car A and Car B. Despite having similar resale values, Car A's IDV is ₹4 lakh, while Car B's IDV is ₹5 lakh. If both cars are stolen, Car B's owner will receive ₹1 lakh more in insurance claims due to the higher IDV. However, it's important to note that Car B's owner would have been paying a higher premium all along as a trade-off for the increased coverage.

A higher IDV might seem beneficial for maximising insurance claims, but it's crucial to consider your car's resale value as well to ensure that you're not overpaying for coverage.

How is Resale Value Determined?

The resale value is influenced by various factors such as the car's brand, model, age, mileage, condition, market demand, and even geographical location. A well-maintained car of a popular model can fetch a decent resale value in the market. However, unlike IDV, depreciation isn't the only influential factor here. Factors like vehicle maintenance and market demand also come into play.

IDV versus Resale Value

While IDV and resale value may seem similar, they serve different purposes in the world of car insurance. The IDV is determined by the insurer at the time of policy issuance and is based on factors such as the car's age, make model, and depreciation. On the other hand, resale value refers to the amount you can expect to receive if you were to sell your car in the market.

Conclusion

Knowing the difference between IDV and resale value is important when buying a car insurance policy. You can ensure optimum coverage at affordable rates by setting an accurate IDV and comparing it with your car's resale value. While the IDV may be a good indicator of the ballpark resale value of the car, other factors affect the resale value.

When it comes to peace of mind and protecting your investment, experience the ease of car insurance with ACKO for a hassle-free digital claims process and round-the-clock support.