How Much Insured Declared Value (IDV) is Reduced Every Year?

Having an insurance policy for your car is like having protection coverage that helps you financially in case of any vehicle mishap, such as car accidents, theft, riots, natural disasters, etc. When you buy car insurance, multiple factors have to be taken care of, including premium costs, add-ons, claim settlement ratio, exclusions, and insured declared value. Many people are not aware of the role of insured declared value in their insurance policy. In this article, we will learn about insured declared value and how it works. 

What is The Insured Declared Value (IDV)?

Insured declared value is the insurance amount of your car that you will receive if it gets damaged during an accident or tragedy and cannot be easily repaired. This is the maximum amount fixed by your insurance company that you get while claiming your car insurance and depends upon multiple factors. These include brand, year of manufacture, model, and the selling price of your car minus depreciation. Depreciation refers to the cost of normal wear and tear on your vehicle. Depreciation is not included while calculating the IDV of your vehicle. 

How is IDV Depreciated Over time?

The insured declared value of your vehicle is not a fixed value. It keeps changing as per the age of your vehicle, which means if your car is new, its depreciation is low, and thus the IDV will be high. After certain years, as you use your car and its wear and tear starts to happen, the depreciation value will increase and the IDV of your car will be reduced. In simple words, the older your car is, the lower its insured amount will be. 

Let’s understand the basic calculation:

If you do not add car accessories:

IDV of your car = Selling price of your car (manufacturer’s price) – Depreciation 

If you add car accessories (extra from what is pre-installed in your car):

IDV of your car = Selling price of your car (manufacturer’s price) – Depreciation + Cost of accessories which is not included in selling price – Depreciation) 

Note that registration costs, and insurance costs are not included while calculating IDV of your vehicle. 

Understanding The Depreciation Schedule: Year by Year

The standard depreciation rate of a car has been fixed by the Insurance Regulatory and Development Authority of India (IRDAI). This value is used by the insurance companies to calculate the IDV of your car. It is based upon the age of your car, which is the number of years your car has been used since you purchased it. 

If your car is more than 5 years old, then you can negotiate the IDV of your car with your insurer. It is basically a mutual agreement between you and your insurance provider. In this case, the IDV will be decided by considering the condition of your car, brand, model, its market value, and the condition of the spare parts, if any used. 

Factors Affecting IDV Depreciation

There are multiple factors that determine the IDV depreciation. These are:

Age of your vehicle: 

As your vehicle gets older, it depreciates faster. Therefore, the IDV of your vehicle gets reduced. More the depreciation, lesser will be the IDV.

Market value of your vehicle: 

Those vehicles with a higher market value will get better insurance coverage due to their brand name and demand. 

Model of your vehicle: 

A new vehicle model will get better insurance coverage than an old model due to its lower depreciation rate. 

Maintenance of your vehicle: 

Poorly maintained vehicles undergo faster wear and tear; therefore, their IDV gets reduced compared to well-maintained vehicles. 

What to Do to Maintain IDV?

If you want to get the best insurance coverage for your car, you can consider the following suggestions:

Timely Maintenance: 

If you want to get a better IDV for your car, pay attention to its regular maintenance. 

Wisely Choose the Add-Ons: 

You can choose the add-ons, like the zero depreciation cover, to enhance the idv of your vehicle.

Avoid too many modifications:

Adding extra accessories to your car may increase or decrease its idv depending upon their nature and the terms of the policy provider. Do not go for major modifications that may impact your vehicle’s idv negatively.

Timely Renewal of Policy: 

Go for a timely renewal of your policy and ensure that your vehicle is valued accurately at the time of renewal to maintain a better IDV. 

FAQs

Q: How does IDV impact my premium amount?

A: Less insured value means less premium, and if you want more IDV, then you have to pay a higher premium. 

Q: Should I go for lower coverage if my car is old?

A: Yes, if your car is old and its market value is not high, then you can opt for low insurance coverage as you will have to pay lower premiums.

Q: Is the IDV negotiable?

A: Yes, you can always negotiate the insurance coverage with your policy provider, especially when your car is more than 5 years old. Always go for the best coverage plan as per your needs and affordability. Visit https://www.insurancedekho.com/ for more information. 

Q: What is a zero-depreciation cover? 

A: Also known as bumper-to-bumper cover, zero depreciation cover provides the insured person with the benefit of not considering the depreciation value of the parts while calculating the IDV. In this case, the policyholder can claim the full insurance amount for their vehicle. 

If you want to know more about your car insurance, reach out to us at +91-7551196989 or email us at support@insurancedekho.com