Decoding IDV: A Comprehensive Guide to the IDV Calculator
The IDV or Insured Declared Value is a crucial component of motor insurance. It plays an important role in setting the premiums for your insurance as well as determining the payout in case of a claim. The calculation of IDV is complex and depends on multiple factors. Fortunately, there are IDV calculators available to make this process easier.
In this guide, we will delve deeper into the IDV calculator and how it is used in the motor insurance industry. We will also explore the impact of IDV on your insurance claim and provide you with tips on how to make the most of your IDV.
What is IDV?
IDV or Insured Declared Value is the maximum amount of money that an insurer will pay you in the event of a total loss accident. This value is based on the current market value of your vehicle, as determined by the age, make, model, and condition of the car. The IDV is calculated by the insurer and is used as the basis for setting the premium for your car insurance.
The IDV is not the same as the market value of the car. The market value of a car is the price at which it can be sold or bought in the open market. Whereas, the IDV is the amount that the insurance company is willing to pay in the event of a total loss. It is important to note that if your car is stolen or damaged beyond repair, the IDV is the maximum amount that the insurance company will pay you.
How is IDV Calculated?
IDV is calculated by the insurance company using a formula that takes into consideration the age, make, model, and condition of your car. The formula for calculating IDV is as follows:
IDV = {Manufacturer’s Listed Selling Price – Depreciation} + (Cost of Accessories not included in the Listed Price)
The Manufacturer’s Listed Selling Price is the price at which the vehicle was sold by the manufacturer. Depreciation represents the decrease in the value of the car due to wear and tear, age, and usage. Accessories that are not included in the listed price include any modifications or after-market installations such as music systems, alloy wheels, etc. The cost of these accessories is added to the base IDV.
For instance, if you own a Maruti Suzuki Swift and want to renew your insurance, you can use the IDV calculator provided by the insurer. Let’s say your car is one year old and its listed price is Rs. 6 lakh. Also, the value of the accessories installed in the car is Rs. 40,000. Let’s assume that the depreciation applicable on the car is 10%. Then your IDV will be calculated as follows:
IDV = {Manufacturer’s Listed Selling Price – Depreciation} + (Cost of Accessories not included in the Listed Price)
= {6,00,000 – (10% of 6,00,000)} + 40,000
= 5,40,000 + 40,000
= 5,80,000
In this scenario, the IDV for your car will be Rs. 5,80,000. Your premium will be calculated based on this IDV.
Impact of IDV on Your Motor Insurance Claim
The IDV plays a critical role in determining the payout in case of a claim. In the event of a total loss, the insurance company will pay you the IDV or the sum assured, whichever is lower. So it is important to get the IDV right to ensure that you are adequately covered.
If you set the IDV too high, you will end up paying higher premiums than necessary. On the other hand, if you set the IDV too low, you will not be adequately compensated in the event of a total loss. Additionally, if you under-insure your car, you will be liable to pay a portion of the cost of repairs.
Tips to Make the Most of Your IDV
There are several ways to make the most of your IDV. Here are some tips to help you maximize your claim:
- Set the IDV correctly: It is essential to set the IDV correctly to ensure that you are adequately covered. If you are unsure about the value of your car, you can seek the help of a professional car valuer.
- Choose a higher voluntary deductible: A voluntary deductible is the amount that you agree to pay in the event of a claim before the insurance company steps in. Choosing a higher voluntary deductible can significantly reduce your premium.
- Insure your car for its full value: Insuring your car for less than its full value can leave you under-insured. Make sure you include the cost of accessories and modifications in the IDV.
- Maintain a good driving record: Maintaining a good driving record can help you get discounts on your premium and increase your chances of getting your claims settled quickly.
- Opt for a bundled policy: Opting for a bundled policy such as a car and home insurance bundle can help you save on your premium.
Conclusion
In conclusion, the IDV is an important component of motor insurance that determines the payout in case of a claim. The IDV is calculated based on the age, make, model, and condition of the vehicle. It is imperative to set the IDV correctly to ensure that you are adequately covered. Using an IDV calculator can make the process easier. Additionally, there are several ways to make the most of your IDV, including choosing a higher voluntary deductible and insuring your car for its full value. By following these tips, you can ensure that you get the best possible payout in case of a claim.