What is Insured Declared Value (IDV)? How is it calculated?

22 May 2023|

1 min read |

by ICICI Securities Team

The term “Insured Declared Value” is frequently used in the insurance sector, particularly when discussing auto insurance. It is crucial to understand what does IDV mean in insurance since it directly affects the premium you pay and the payout you would receive in the event of a claim. To secure adequate reimbursement of a claim, you should select an IDV that accurately reflects the current market value of your vehicle. If you opt for an insured declared value (IDV) that is too low, you run the risk of receiving less than what you need in compensation in the event of an accident or theft. Conversely, if you choose an IDV that is too high, you may end up paying more in insurance premiums than you should.

What is Insured Declared Value (IDV)?

It is crucial to understand what is insured declared value before you finalise the insurance terms for your vehicle.

The insured declared value is the highest amount that an insurance company will pay to you in case your vehicle is damaged beyond repair or it has been stolen. It reflects the vehicle’s current market value on the basis of its purchase price and depreciation over time. The IDV is fixed at the time the insurance is purchased.

The insured declared value is important because it directly affects the insurance premiums. The more the IDV, the more premium you pay.

How is IDV Calculated?

Insured declared value is computed using the invoice price, which is the manufacturer’s quoted selling price for the car, less any applicable depreciation. Depreciation is the term used to describe a vehicle’s loss in value as a result of damage, ageing, and other factors.

The formula to calculate IDV is as follows:

IDV = (Manufacturer's listed selling price - Depreciation)

What are the factors that affect the IDV of your car?

The factors that affect the Insured Declared Value of your car are as follows:

Age of the Vehicle: The IDV shows that as an automobile gets older, its value declines due to wear and tear. The IDV of an automobile will decrease as it gets older.
Make & Model: Expensive or luxury models have a higher market value and, as a result, a higher IDV, whereas low-cost models have a lower IDV.
Size of the vehicle: Vehicles having a bigger cubic capacity (cc) have a higher market value and, as a result, a higher IDV.
Vehicle Condition: Vehicles in good condition with minimal damage and no significant accidents have a higher IDV than cars in poor condition.
Changes to the Vehicle: Changes to the vehicle that increase its worth can lead to a higher IDV, while changes that decrease its value can lead to a lower IDV.

Conclusion

Understanding the IDV meaning and how IDV is calculated is important if you want to get the best deal while purchasing insurance for your vehicle. Make sure to select an IDV that accurately reflects your vehicle’s value to ensure you are paying an adequate premium and eligible for enough compensation in the event of a claim.

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