IDV stands for “Insured Declared Value,” which is an essential factor in determining the premium of your car insurance policy. IDV refers to the current market value of your car that an insurance company will pay you in the event of theft or total loss of your vehicle due to an accident or any other unforeseen circumstances.

The IDV is determined based on the manufacturer’s listed selling price of the car minus the depreciation cost. Depreciation is the loss in value of your car due to normal wear and tear, ageing, and usage. The depreciation cost varies depending on the age and condition of your car.

The calculation of IDV for your car is based on the following factors:

  1. Age of the car: As your car ages, the IDV reduces due to the depreciation cost.
  2. Make and model of the car: The IDV is higher for expensive cars and lower for budget cars.
  3. Geographic location: The IDV is based on the current market value of your car in your location.
  4. Fuel type: The IDV is higher for diesel cars compared to petrol cars.
  5. Registration city: The IDV is based on the registration city of your car.

The IDV of your car is crucial in determining the premium of your car insurance policy. A higher IDV will result in a higher premium, while a lower IDV will result in a lower premium. It is essential to choose the correct IDV value, by using the IDV calculator, for your car to ensure adequate coverage in case of any unforeseen events.

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IDV of a new car: The IDV of a new car is calculated based on the manufacturer’s listed selling price (Ex-showroom price) of the car, which is the price of the vehicle without including registration charges, insurance, and other related expenses. The IDV for a new car is generally set at a maximum of 95% of the ex-showroom price of the vehicle.

For instance, if the ex-showroom price of your new car is Rs. 10 lakhs, then the IDV for your car would be Rs. 9.5 lakhs (95% of the ex-showroom price). The IDV is then adjusted based on the age of the car, depreciation, and other factors mentioned earlier.

It is essential to ensure that the IDV of your new car is correctly calculated, as it determines the amount that you will receive from the insurance company in case of theft or total loss due to an accident. A higher IDV means a higher payout in case of loss, but it also results in a higher premium. Therefore, it is essential to strike a balance between the IDV and the premium to ensure adequate coverage at an affordable cost.

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Why is it important to set the IDV correctly

Setting the IDV correctly is important for several reasons:

1) Adequate Coverage: The IDV determines the maximum amount that you will receive from your insurance company in case of theft or total loss of your car. Setting the IDV too low may result in insufficient coverage, while setting it too high may lead to an unnecessarily high premium. Therefore, it is essential to set the IDV correctly to ensure adequate coverage at an affordable cost.

2) Premium Calculation: The IDV is one of the primary factors that determine the premium of your car insurance policy. Setting the IDV too high will result in a higher premium, while setting it too low may reduce the premium but result in insufficient coverage. Therefore, it is crucial to set the IDV correctly to ensure that you are paying a fair premium for the coverage you receive.

3) Resale Value: The IDV also affects the resale value of your car. If the IDV is set too low, it may reduce the resale value of your car as potential buyers may perceive it to be less valuable. On the other hand, if the IDV is set too high, it may not correspond to the current market value of the car, making it difficult to sell.

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Tips on setting the IDV correctly

Here are some tips on setting the correct IDV during the process of expired car insurance renewal:

  1. Consider the Age of Your Car: The IDV of your car is based on its current market value, which is determined by factors such as its age, make and model, and depreciation. As a general rule, the older your car is, the lower its IDV will be. Therefore, it is essential to consider the age of your car when setting the IDV.
  2. Research the Market Value of Your Car: Researching the current market value of your car is essential in determining its IDV. You can check online car valuation tools, dealerships, or other reliable sources to get an idea of your car’s current market value.
  3. Be Realistic: When setting the IDV, it is essential to be realistic about the condition of your car. If your car is in good condition, you may be able to set the IDV higher. However, if your car has significant wear and tear or other issues, it may be more appropriate to set the IDV lower.
  4. Consider the Cost of Replacement: When setting the IDV, it is crucial to consider the cost of replacing your car with a similar make and model. This will ensure that you receive adequate coverage in case of total loss.
  5. Consult with Your Insurance Company: Your insurance company can provide guidance on setting the IDV correctly. They have the necessary expertise and experience to help you determine the appropriate IDV for your car.

To conclude, setting the IDV correctly is critical in ensuring adequate coverage, fair premium calculation, and the proper resale value of your car. By considering the age of your car, researching the market value, being realistic, considering the cost of replacement, and consulting with your insurance company, you can set the IDV correctly and enjoy peace of mind knowing that you are adequately covered.

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