How to Increase the IDV Value of Your Car Insurance Policy

You've just bought a sleek new car and drive down the streets with much pride. But amidst the joy of ownership, how safe is your investment really in case something goes awry? Enter Insured Declared Value, or IDV - a very important figure for your car insurance that will determine the maximum compensation in such cases of theft or severe damage.

Now, assume that you want to maximise this protection. How do you increase the IDV value of your car? Just adjust it while purchasing your insurance online - the majority of providers let you modify this figure to come closer toward the realistic market value of your car, balancing its cost with protection effectively.

In this article, let's talk about IDV, its impact on premium, how it is calculated, and much more.

Let's get started!
 

What Is IDV?

IDV stands for Insured Declared Value, which is determined after deducting depreciation from the manufacturer's listed price of your vehicle. It is basically the maximum payable amount to you in case your vehicle gets stolen or is rendered unusable because of damage. In the same breath, remember that the IDV shall apply only when the policy has Own Damage cover. Therefore, if you have a third-party liability insurance policy, the IDV does not come into the picture at all.
 

How Is IDV Calculated?

While purchasing a new vehicle, the IDV will be decided by the manufacturer's selling price, with a depreciation factor. The following is the way to calculate an approximate IDV in insurance:

With Accessories

In case you have added some fancy accessories to your car, then the formula will look this way -

IDV = Manufacturer's Selling Price – Depreciation Cost + Accessories Cost – Depreciation On Those Accessories.

Without Accessories

In the case where you have not added any accessories to your automobile, it takes an even simpler formula -

IDV = Manufacturer's Selling Price – Depreciation Cost.

You can also make use of an IDV calculator, which most insurance companies or web aggregators host on their websites for your convenience. This considerably makes the process hassle-free.
 

Impact Of IDV On Premium

Now, let us talk about how IDV affects your premium. The major factor that impacts your insurance premium is the IDV. In simple terms, the IDV of your car is just directly proportional to the premium. It simply means that the higher the IDV, the higher will be the premium.
 

How To Increase IDV?

Setting the IDV is an important step once you buy a n insurance policy for your vehicle if you have opted for a comprehensive policy. Here's how it works: once you enter your car details on any insurance company's portal, you will find a section on IDV on the quote page - where you can see the minimum and maximum IDV values that can be set for your vehicle.

The insurance company usually gives you the option to edit the IDV, allowing you to choose any value between the lowest and highest IDV limits. You can set the IDV according to your preference directly on the website. Just keep in mind that your premium will be calculated based on the IDV you select.

Note: You generally cannot increase your IDV after a policy has been issued. IDV is fixed at the time of purchase or renewal. The right time to review and increase your IDV is at renewal. Do not let the insurer auto-fill a lower IDV without your review, always check the IDV field on the quote page before completing payment.
 

What Is The Impact Of Choosing The Wrong IDV?

It is, in simple words, the final agreed valuation of your car by you and the insurer. And guess what? If, unfortunately, the vehicle gets stolen, or its condition is beyond repair, the IDV is what the insurer pays as the maximum claim amount.
 

Choosing Your IDV: High Vs. Low

Now, let us see what the implications of selecting a higher or lower IDV will be. If you go for a higher IDV, then the premium will certainly be on the higher side. Though it might appear apparently good for maximum coverage, sometimes it can backfire. At times of claims, insurers have been known to dispute an unusually high IDV they initially agreed to and issued a policy for. Even though courts typically side with the customer in such cases, it can still be quite a hassle to deal with.

On the flip side, if you choose a lower IDV, your car will be underinsured. Let's just say your car meets with a huge accident and goes into a nasty state of damage beyond repair or gets stolen. In that case, the insurer will pay you a lesser amount. In other words, you might end up with less than the market value of your car. This is pretty disappointing! Isn't it?
 

IDV vs Return to Invoice (RTI) Cover: What's the Difference?

If your car is under 3 years old and has a high market value, RTI cover is usually a better choice than simply maximising IDV, since RTI pays the original invoice price rather than the depreciated value.
 

How Can You Find Out The IDV That Is Best For You?

With various IDVs appearing on different websites, it can get a bit confusing how to work out what your vehicle's IDV should actually be. So, how do you choose the best IDV for your vehicle?

Calculating Your IDV

To find the IDV, here's a simple formula:

IDV=  Total amount paid for the car (including accessories, excluding registration and taxes) − Depreciation
 

Understanding Depreciation

As years go by, your car ages as well, just like you. This is called depreciation.

Depreciation is typically calculated based on the age of your vehicle. Each insurer will enclose the age-wise depreciation of the vehicle either in their policy wording or on their website. Below is the IRDAI-prescribed depreciation schedule for calculating car IDV (Insured Declared Value):

Source: IRDAI Motor Insurance Regulations — https://www.irdai.gov.in

If you don't want to get into complex mathematics, there is a simpler way out. Just find out the secondhand value of your vehicle from sources like a car resale website. Keeping this car's resale value as a reference, you can set the IDV for your vehicle.

Once you have calculated the IDV, just fill it out on the website from where you are going to buy your policy. And, after making a payment and upon receiving your policy documents, check your IDV once again - this time, it should be exactly the same as what you would want to purchase. You will be confident that you have got the right coverage and don't have to go through those meshy math calculations. Easy breezy! Isn't it?
 

Important Things To Note

When choosing an IDV for your vehicle, here are four things you should keep in mind:

• Know The Resale Value Of Your Car: Prior to insuring your car, understand its basic resale value. This will help in setting realistic IDV.
• Check Recommended IDV: Pay attention to what most insurance websites are recommending as IDV on their websites; then take your call accordingly. That will give you a fair idea.
• Aim for Market Value: Always try to get an IDV that is as close as possible to the market value of your car. It gives an assurance that if your vehicle is rendered a total loss, you will be amply covered.
• Compare Premium And The IDV: After setting the IDV on comparison websites, you'll notice that the premiums displayed for each insurer may correspond to different IDVs recommended by that insurer.
   

Let’s Wrap It Up!

Setting the right IDV is like finding the perfect fit for your vehicle's protection. It's not just about numbers but about ensuring your prized possession is safeguarded against unexpected twists on the road. Whether you're adjusting IDV online or using an insurer's calculator, the goal remains clear: to strike that balance between adequate coverage and manageable premiums. So, as you finalise your insurance policy, rest assured that your choice of IDV reflects your car's true worth, offering peace of mind whenever you hit the road.