IDV or Insured Declared Value of the vehicle is calculated at the time of initial purchase as well as at policy renewal. IDV is considered as the vehicle sum insured and is fixed at the commencement of each policy period for each insured vehicle.
What is IDV (Insured Declared Value)?
IDV or Insurance Declared Value is arrived on the basis of the manufacturer’s current selling price (not the price at the time of purchase of the vehicle) of the brand and model and then it’ll be adjusted with the standard depreciation rates as per Indian Motor Tariff.
e.g. if a customer purchase a vehicle in Apr’15 at Rs. 10 lakhs and the current (Feb’17) selling price of the same brand and model is Rs. 11 lakhs; the insurance company would consider the current listed selling price i.e. Rs. 11 lakhs for the calculation of IDV.
IDV = [Manufacturer’s Current Selling Price + Accessories (if any fitted to the vehicle) ] – (Standard Depreciation Rates as per Indian Motor Tariff)
On Road Price = [Manufacturer’s Current Selling Price + Accessories (if any fitted to the vehicle) ] + Taxes + Registration + Insurance
For brand new vehicle, the insurance is calculated on IDV value (5% of Ex-Showroom Cost). In it any car dealers discounts/concessions are not taken into account. So the vehicle needs to be insured for Ex-Showroom Cost and not on the cost after any dealer discount. e.g. Vehicle is 4 Lakhs and dealer has offered 1 Lakh discount to customer because he has exchanged an old vehicle for new one. Than in this case the IDV would be 4 Lakhs.
IDV Calculation Example:
Maruti Suzuki Wagon R 1.0 – LX1
Ex-Showroom Price = 4,09,882 (As on 31/01/2017)
5% Depreciation on Ex-Showroom Price = 20494.1
IDV = 4,09,882 – 20494.1 = 389387.9
Insurance = 17,061 (on IDV 389387.9)
RTO = 23,895
MCD = 2,000
On-Road Price (Delhi-East) = 4,52,838
What includes in IDV?
IDV always uses the current selling price of the brand and model of your car, not the price at which you originally bought it for. This cost includes the Current Selling Price and does not include Local Taxes, Duties/Cess, Registration Cost. For e.g. Maruti Swift LXi could have come at a cost price of Rs. 5,00,000 when you bought it 3 years back. However, if Maruti has increased the price to Rs. 5,20,000 today, the IDV will be calculated by using the depreciation value (as per table) on Rs. 5,20,000 and not Rs. 5,00,000. Similarly, if the current price of the exact same model is reduced by the company, the depreciation rate will be charged on the reduced price and not on the price at which you bought it.
Why IDV is important?
IDV is the maximum amount that an insurance company will pay in case of a claim, i.e. in the event of:
1. Total Loss (the vehicle is no longer capable of running on the road),
2. Constructive Total Loss (aggregate cost of retrieval and/or repair of the vehicle is greater than 75% of IDV) or
3. Vehicle being stolen.
Things you should know:
1. IDV of the vehicle beyond 5 years of age and of obsolete models of the vehicles (i.e. models which the manufacturers have discontinued to manufacture) is to be determined on the basis of an understanding between the insurer and the insured.
2. IDV shall be treated as the ‘Market Value’ throughout the policy period without any further depreciation for the purpose of Total Loss / Constructive Total Loss or in an event of theft of the vehicle within the policy period.