Insured Declared Value Means?
Insured Declared Value (IDV) is a crucial concept in the Indian car insurance industry. It is the maximum sum assured by the insurance company in case of total loss or theft of the insured vehicle. IDV is calculated based on the current market value of the vehicle and the depreciation rate as per the Insurance Regulatory and Development Authority of India (IRDAI) guidelines.
How is IDV calculated in India?
IDV is calculated using the following formula:
IDV = Manufacturer’s Listed Selling Price – Depreciation
The depreciation rate is fixed by the IRDAI and varies based on the age of the vehicle. The following table shows the depreciation rates for different vehicle ages in India:
Vehicle Age Depreciation Rate Less than 6 months 5% 6 months to 1 year 15% 1 year to 2 years 20% 2 years to 3 years 30% 3 years to 4 years 40% 4 years to 5 years 50%
Importance of IDV in Indian Car Insurance Policies
- Premium Calculation: IDV is an essential factor in determining the premium amount of the car insurance policy. Higher the IDV, higher the premium and vice versa.
- Claim Settlement: In case of total loss or theft of the vehicle, the claim amount is based on the IDV. Therefore, it is crucial to ensure that the IDV is calculated accurately, taking into account the depreciation rates.
- Renewal of Policy: IDV is recalculated at the time of policy renewal based on the current market value of the vehicle. Therefore, it is necessary to keep the IDV updated to ensure adequate coverage and avoid under-insurance or over-insurance.
- Insured Value: IDV is the insured value of the vehicle, which is why it is essential to ensure that the IDV is calculated accurately. Under-insurance or over-insurance can lead to claim settlement issues and financial losses.
Insured Declared Value (IDV) is a vital concept in the Indian car insurance industry. It is the current market value of the vehicle, which is used to calculate the premium and the claim settlement amount. Accurate calculation of IDV is crucial to ensure adequate coverage and avoid under-insurance or over-insurance. It is always advisable to evaluate the IDV and consider the depreciation rates while purchasing or renewing car insurance policies.