Motor Insurance

Why Are IDVs Different On Various Websites - How To Choose?

by SMCIB on Saturday, 10 June 2023

Why Are IDVs Different On Various Websites - How To Choose?

If you own a car, you are probably aware of the significance of Comprehensive Car Insurance and how it can protect you from a variety of risks. It offers protection against risks including theft and damages from accidents, natural calamities, etc., in addition to providing liability coverage in the event that you cause injury to a third-party individual or property.

While browsing comparison websites or receiving quotes from dealers for Comprehensive Car Insurance, you may have come across the term ‘IDV’ or ‘Insured Declared Value’. IDV is one of the most crucial aspects to consider when buying Car Insurance. It is the coverage you get in the event that your car is permanently lost due to theft or is irreparably damaged. If you file a claim for your vehicle in the event that it undergoes total loss or is stolen, it is the maximum amount of coverage you will receive from the insurer.

As important as it is to buy insurance after you buy a vehicle, it is equally important to buy adequate cover. This will ensure two things -

  • You do not have to incur losses from your own pocket if something unfortunate happens.

  • You are not overinsured or have to pay an extra premium for the same.

Another crucial thing you would have discovered when researching multiple websites is that the IDV suggested is not fixed. Insurance companies and platforms will display a recommended and lowest IDV, as well as allow you to adjust the IDV, subject to certain limitations.

How do you decide the fair IDV for your can so that you don’t get into trouble, in case there is a large claim? Why is the IDV not the same on different websites when the details of your vehicle are the same? What are the implications of IDV, and how do you decide how much is enough?

That’s what we’ll cover in this article. So, let’s get started.
 

What Is IDV?

The IDV, or Insured Declared Value, is the value of your vehicle declared by you. Basically, as per the process, you declare the value of your car, which the insurer can accept or reject before issuing you the Car Insurance Policy.

Valuation of cars, however, can be complicated for individual customers. Hence, most insurers recommend the IDV while purchasing the policy to provide convenience.
 

How Is The Recommended Or Lowest IDV Calculated?

The IDV recommended by insurers is determined after considering a variety of factors, such as -

  • Your vehicle's make, model, and variant

  • Your city

  • Year of manufacture

  • Registration place of the vehicle, etc.
     

Why Does The Recommended IDV Vary On Websites?

Every insurance company has its own method of determining the IDV of a vehicle. And, the IDV displayed on insurance websites will always differ by 5% to 10%. This IDV recommendation can be different on different platforms, even for the same insurance company. There are two reasons for this.

  • IDV is an approximate valuation done by the insurer. Therefore, it is usually not a fixed number but rather a range. For example, an insurer may decide that the IDV for a Maruti Dzire of a specific make, model, variant, year of manufacture, and the city is between 4.60 Lakhs and 5.10 Lakhs.

  • The method of displaying the IDV may differ among platforms. While some platforms will show the optimum value, some may show a low IDV to offer lower premiums.
     

What Is The Implication Of Choosing The Wrong IDV?

As discussed above, the IDV is the final valuation of your car agreed upon between you and the insurance company. In cases of permanent loss resulting from theft or damage, the insurer will pay the IDV as the maximum amount of claim.

For instance, Karan has a Comprehensive Car Insurance Policy with Rs. 5 Lakhs IDV. A few months after buying the policy, he meets with an accident, and his car is completely damaged. When he applies for a claim under his insurance policy, the maximum amount the insurance company will pay is Rs. 5 Lakhs (the Insured Declared Value).

Now, let’s take a look at the implications of choosing a higher or lower IDV.

  • If you take a higher IDV, you pay a higher premium. And, during claims, insurers have been known to dispute an unusually high IDV to which they had agreed and issued a policy. Although courts have always ruled in favor of the customer, it still remains a headache.

  • If you take a lower IDV, your car will be underinsured. In case of a major loss, where your car is damaged irreparably, or in case of theft, this is the amount the insurer will pay you. So, you may end up getting less than the market value for your car.
     

How Can You Find Out The IDV That Is Best For You?

With different IDVs on different websites, you may be confused as to what your vehicle's IDV should be. How do you choose the best IDV for your vehicle?

Well, to calculate the IDV you can use the following formula -

Total amount paid by you for the car (including accessories, excluding registration and taxes) - Depreciation as listed below.

Depreciation is calculated based on the age of your vehicle. Each insurer will have age-wise depreciation of the vehicle listed either in their policy wording or on their website. Here is a standard list that many insurance companies follow:

Age of the vehicle Depreciation % for IDV
Up to 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%
Beyond 5 years To be negotiated
 

If you don't want to get into all of the math calculation, an alternative way to determine the IDV is by finding out the secondhand value of your vehicle from a reliable source, such as a car resale website. You can base the IDV of your vehicle on the car's resale value. Once you've determined the IDV, you may enter it into the website where you'll be purchasing the policy. Once you've made the payment and received your policy documents, double-check the IDV to ensure it matches the one you chose before purchasing.

 

What Should You Do If You Realize Your IDV Is Incorrect?

If the value you choose is higher than your car's resale value, you can relax. You don't have much to lose now that the insurance company has agreed to the value and the policy has been issued.

However, if the value is significantly low, you should immediately inform your insurance company and request a change in the coverage amount. The insurer may request you to pay an additional premium for the increased valuation. There is also the possibility that the insurer will cancel your policy. In that case, you will need to buy a new policy from a different insurer.
 

Important Things To Note

Here are four things you must keep in mind when choosing an IDV for your vehicle -

  • Before insuring your car, you should always have a basic understanding of its resale value.

  • You should pay close attention to the IDV recommended on insurance websites, before making any decisions.

  • You should always try to get an IDV that is equal to the market value of your car.

  • After you fix the IDV on comparison websites, the premiums displayed for each insurer may be for different IDVs recommended by that insurer. So, before you make a decision, you should always look at premiums carefully along with the IDV.

That is all about why IDVs are different on different insurance websites. If you select an incorrect IDV, you may have to face issues during a claim. Hence, when deciding how much IDV to choose for your vehicle, make sure you keep the points we’ve discussed above in mind.

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