What is the Insured Declared Value (IDV) in Motor Insurance?

insured declared value
Introduction of insured declared value

If you have a comprehensive motor insurance policy then you must be aware of the Insured Declared Value (IDV). It is the maximum sum assured of your vehicle in your motor insurance policy. This is the maximum value that your insurer will pay in case of theft or total loss.

Normally, Insured Declared Value is fixed on the basis of the manufacturer’s listed price of the vehicle and depreciation, etc. Your insurer fixes the insured declared value of your vehicle at the time of commencement/renewal of the policy.

If you are planning to buy a new motor insurance policy or renew it then you must check your vehicle’s final Insured Declared Value. There should be the correct value of your vehicle in the policy. Ultimately this is the maximum market value of your vehicle.

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Why is Insured Declared Value Important?

This is the factor that is directly proportional to the premium for the insurance policy. If your Insured Declared Value (IDV) is higher side then the premium will be higher. If the insured declared value is low then the premium will be lower side.

You must think twice while deciding on the Insured Declared Value of your vehicle. If your insurer provides you with very less value for the vehicle then you can negotiate with the company. Your request to increase it up to a certain level.

Having a very low value is not a good idea. Buying a lower Insured Declared Value policy will reduce the premium but it also reduces the sum assured of your vehicle.

Factors Behind Insured Declared Value

There are many factors that decide the value of your car or two-wheeler. The following are the main factors:

  • Make and Model the car or two-wheeler
  • RTO Location
  • Age of the vehicle
  • Depreciation Rate

Insured Declared Value (IDV) mainly depends on the make and model of your vehicle. The age of your vehicle is also a deciding point. Very old vehicles will have a lower value and new vehicles will have a higher value.

The market value of any vehicle is also depending on its city of registration. Insured declared value is fixed on the basis of a standard rate of depreciation.

If the vehicle is less than six months old, then there is a 5% depreciation. For more than six months and less than one year 15%. If the vehicle’s age exceeds one year but less than two years then 20% depreciation.

When the vehicle age exceeds 2 years but less than 3 years then 30% depreciation. If the vehicle’s age exceeds 3 years but less than 4 years then the rate of depreciation is 40%. If it is more than four years old but less than five years then the depreciation rate is 50%.

Should you keep IDV low or High?

This is a very crucial and important question. Many people may get confused that which is good for them. A higher value will cost you a higher premium. But it is beneficial at the time of claim because you get a claim according to a higher Insured Declared Value.

A lower value will cost you less premium. But it is not beneficial at the time of claim because you will get a claim according to a lower Insured Declared Value. So, should you always buy a higher Insured Declared Value policy?

My answer is that You should know the current market value of your vehicle. It should be close to the market value and an ideal value for your vehicle.

IDV vs Policy Inception and Renewal

You should have eyes on Insured Declared Value every year. When you buy a policy for the first time then you must research and get the best one. But sometimes you may notice that at renewal time your company has reduced the Insured Declared Value more than your expectation.

For example, When Mr. Srivastava purchased a Hyundai car and took insurance. The first time, the Insured Declared Value of his car was Rs. 10 lac. But when he got a renewal notice to renew the policy, the company reduced its value to Rs. 8 lac. So, there was a big gap between his vehicle’s current value and the first year’s value.

He contacted his insurer and negotiated the value and finally company fixed Rs. 9 Lac. This was the expected value for Mr. Srivastava and he agreed to that. An example is only for understanding purposes. For more details, you should read your policy documents.

You should also check your vehicle insured’s declared value at the time of renewal also. If you find any gap then you must contact your insurer to fix the correct IDV in your policy.

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