Insurance

5 things about Insured Declared Value that you probably didn’t know

So, every time you hear ‘Car Insurance’ you inevitably hear IDV?

But you don’t know what is it all about?

Well, let us simplify it for you. Insured Declared Value(IDV) is the current valuation of your car in the market.

There are various other factors that are then correlated with your Insured Declared Value (IDV) such as the premium of your insurance etc., making it essential for you to know all about it.

Why it is important to know about Insured declared value? Good question.

Insured Declared Value is the value at which your car is priced at the time of purchasing or renewal of the policy. Therefore, it is important to know and understand about IDV while purchasing or getting renewal of the insurance.

  1. Make an informed decision:
  1. About how much you can claim–

Insured Declared Value is the corner stone around which your entire insurance story is built.

Car losses, theft, damage are some untoward accidents that may occur. This is an obvious direct hit to your asset and investment.

Insurance cover is, therefore, essential.

Insured Declared Value is the maximum amount the insurer can pay you in case of any of the above mentioned scenarios. Therefore, higher the Insured Declared Value, the more you are entitled to claim. Claims will always be inevitably related to your Insured Declared Value (IDV) value.

  1. About factors that affect your premium amount –

A depreciation chart; that is, a standard used for calculation of Insured Declared Value is always a factor that will be responsible for the premium calculation.

Factors such as the No claim bonus provides some discount on the premium. Some other 3rd party coverage on your asset may also have an effect on the premium. Another important factor is the city of residence. Metropolitan cities have a higher premium value than the other cities 

  1. The fundamentals behind the calculation of your Insured Declared Value: 
  1. Factors used by insurers to calculate your Insured Declared Value, simplified! 

Factors that affect the Insured Declared Value are as follows: 

  1. a) Car registration details
  2. b) City of registration
  3. c) Car model, specifications, manufacturer details
  4. d) Cubic capacity of the engine
  5. e) Vehicle details and description
  6. f) Ex-showroom price- This is taken from an auto-populated database.
  1. Co-relation between Insured Declared Valueand premium, the age old question?

There is a direct co-relation between the Insured Declared Value and your insurance premium.

Therefore, in order to reduce the premium one must not present a lower Insured Declared Value because this would lower your claim value. The same is applicable vice versa, increasing your Insured Declared Value would result in a higher premium amount.

It is always advisable to have an Insured Declared Value that is closest to your Car’s value.

  1. How do you calculate your Insured Declared Value in the best way possible?

The general formula for calculation of Insured Declared Value is:

Insured Declared Value = (Manufacturers listing price- depreciation) + (Accessories not included in the listed price- depreciation)

To help you here’s the simple chart:

Age of Vehicle Depreciation Chart
New Car – 1st Year Insurance done at 95% of Ex-Showroom Price. 5% Depreciation is Deducted
on 2nd Year Renewal 20% Depreciation is Deducted. Insurance done at 80% of Original Ex-showroom Price
on 3rd Year Renewal 30% Depreciation is Deducted. Insurance done at 70% of Original Ex-showroom Price
On 4th  Year Renewal 40% Depreciation is Deducted. Insurance done at 60% of Original Ex-showroom Price
On 5th Year Renewal 50% Depreciation is Deducted. Insurance done at 50% of Original Ex-showroom Price
6th Year Onward 10% to 15% Depreciation on IDV Value of Previous Year is Deducted Year on Year

Based on the above factors that affect your Insured Declared Value IDV, it is safe to conclude that studying IDV in-depth before purchasing a car insurance is quintessential.

While there are various car insurances out there, your choice of insurance should now be based on your Insured Declared Value calculations as explained above.

This will maximise your benefits, especially in case of old or used cars. Understanding concepts like the depreciation value and its association with Insured Declared Value can be a deciding factor when it comes to picking your insurance policy.