Understanding IDV Calculation: The Key to Smart Insurance Choices

By Megha Jain, Content Writer  |  Tuesday, 07 May 2024, 03:43 Hrs


Understanding IDV Calculation: The Key to Smart Insurance Choices

Buying car or bike insurance should be well evaluated because it directly impacts your financial security and protection against unforeseen events. Knowing the components that affect vehicle insurance, such as Insured Declared Value (IDV), is crucial in evaluating your decision. IDV determines the maximum compensation you can receive in the event of a claim, making it essential to ensure adequate coverage for your vehicle's value.

This blog post will serve as a comprehensive guide to understanding IDV calculation and its influence on your car insurance choices and how to use an IDV calculator to determine the accurate IDV value.

What is IDV in Car Insurance?

The IDV, short for Insured Declared Value, is the maximum claimable amount under your car insurance policy. Consider it the monetary protector of your car's market value against theft or damage. Consequently, it has a direct impact on your insurance premium.

When you opt for a higher IDV, you're essentially choosing to pay a higher premium. In contrast, opting for a lower IDV may reduce your premium but would also limit the claimable amount in case of an unfortunate event. You can use an IDV calculator to understand how changing this value can affect your insurance policy for car.

Here is how to use an IDV calculator:

  • Input Vehicle Details: Enter accurate information about your vehicle, including make, model, variant, year of manufacture, and registration details.
  • Assess Depreciation: Consider the age of your vehicle to calculate depreciation, influencing the IDV.
  • Evaluate Optional Accessories: Provide details about optional accessories to adjust the IDV accordingly.
  • Choose IDV Range: Select an IDV range that suits your preferences and budget.

You can always compare quotes from various insurers based on the chosen IDV range.

IDV Calculation Process - Simplified

Calculating your vehicle's IDV (Insured Declared Value) isn't rocket science; it just requires a clear understanding of a simple formula. If your vehicle doesn't have any additional accessories, the formula is quite straightforward:

IDV = The selling price of your car - The depreciation value.

However, the calculation gets slightly tweaked if you've jazzed up your ride with some extras. In this case,

IDV = (Car's selling price - depreciation) + (cost of accessories - depreciation)

Remember that registration and insurance costs aren't factored into this calculation. These factors affect the amount car owners pay for insurance policies.

Factors Influencing IDV

When calculating the IDV of your car, several key factors come into play. Each of these plays a distinct role in shaping the final Insured Declared Value:

Factor

Explanation

Age of the Car

Older cars have a lower IDV due to increased wear and tear.

Type of Car

Larger cars like SUVs typically have a higher IDV than smaller ones like hatchbacks.

Car Model

Brand reputation, specific features, and manufacturing intricacies can all affect a car's IDV.

Location of Purchase

The ex-showroom price, which influences the IDV, can vary depending on the city where you bought your car.

Depreciation

The natural decrease in a car's value over time plays a major role in determining its IDV.

Accessories

After considering their depreciation, any extra fittings or accessories you’ve added to your car also contribute to its IDV.

Pro tip: Before setting an insurance policy for car always use an IDV calculator to ensure you understand how each factor affects your vehicle's IDV.

Pros and Cons of High/Low IDV

Understanding the difference between low and high IDVs is crucial when choosing insurance policy for car or bike. Here's a quick breakdown:

Low IDV

  • Advantages: Lower premiums mean instant savings on insurance costs, giving you more spending flexibility in your budget.
  • Disadvantages: Lower coverage results in reduced claim amounts if your vehicle suffers total loss or theft. This may mean more out-of-pocket expenses for repair or replacement, leading to potential financial loss.

High IDV

  • Advantages: Higher coverage offers larger claim amounts in case of total loss or theft. It provides substantial financial support for replacement, ensuring peace of mind.
  • Disadvantages: Higher premiums, which might upset your monthly budget. If you never need to make a significant claim, you may overpay for benefits not utilised.

Using an IDV calculator is always advisable to strike the right balance between IDV and premiums, ensuring optimum coverage without overstretching your budget.

Conclusion

Understanding IDV calculation empowers you to make informed decisions regarding your auto insurance. It involves striking a delicate balance between premium costs and ensuring adequate coverage. If you crack this, you can avoid overpaying for insurance while also safeguarding against the risk of being underinsured.

At ACKO, we strive to simplify insurance process by offering resources like an intuitive IDV calculator and a wide variety of comprehensive insurance policies to choose from. So, if you want to renew or buy insurance policy for car or bike, explore ACKO from the comfort of your home and get your vehicle covered conveniently.

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.