What is IDV in Car Insurance? Should I Keep it same? Pros, Cons, and Tips

Understanding IDV: A Complete Guide for Car Insurance Policyholders

If you’ve ever purchased car insurance, you’ve likely come across the term IDV or Insured Declared Value. But what does it mean? How is it calculated, and why is it important when deciding on your car insurance policy? Let’s break it down step by step in this conversational guide.

What is IDV?

In simple terms, IDV (Insured Declared Value) is the current market value of your car. It’s the maximum amount your insurance provider will pay you if your vehicle is stolen or completely damaged (total loss). Essentially, it’s the sum insured under your car insurance policy.

Think of IDV as the price your car would fetch if you sold it today, considering depreciation.

How Do Insurance Companies Decide the IDV Value of a Car?

Insurance companies calculate IDV based on the ex-showroom price of your car and adjust it for depreciation. Here’s a quick snapshot of how depreciation is typically applied:

For cars older than 5 years or discontinued models, the IDV is mutually agreed upon by the insurer and the policyholder, often based on market trends.

Should we Keep our IDV High or Low?

Now, this is a tricky question! Setting the right IDV is like walking a tightrope - you don’t want it too high or too low. Let’s explore the pros and cons of both scenarios.

Keeping IDV High

Advantages:

1. Better Coverage: You'll receive a higher payout if your car is stolen or totaled.
2. Peace of Mind: You’re financially better protected.

Disadvantages:

1. Higher Premium: A high IDV means a higher insurance premium, which can strain your budget.
2. Unnecessary Cost: If the market value of your car doesn’t justify the high IDV, you might be overpaying.

Keeping IDV Low

Advantages:

1. Lower Premium: A lower IDV reduces your insurance costs.
2. Budget-Friendly: Ideal if you’re looking for cost savings.

Disadvantages:

1. Reduced Claim Amount: In the case of a claim, the payout will be significantly lower.
2. Financial Risk: A low IDV might leave you underinsured if something happens to your car.

Any Effect of IDV on RTI?

Yes, IDV plays a crucial role in Return to Invoice (RTI) cover. RTI is an add-on cover in car insurance that ensures you get the full invoice value of your car (including registration and taxes) in case of theft or total loss. However:

• If your IDV is too low, you might not qualify for RTI as it covers the gap between IDV and invoice value.
• Keeping your IDV closer to the actual market value of the car makes the RTI add-on a better investment.

What’s the Ideal Approach?

• For New Cars: Opt for a higher IDV to ensure maximum protection.
• For Older Cars: Balance between affordability and adequate coverage by keeping the IDV aligned with the car’s market value.

Final Thoughts

IDV is one of the most critical factors to consider when buying car insurance. While it may be tempting to keep it low to save on premiums, this can leave you financially vulnerable. On the other hand, an unnecessarily high IDV might burden you with higher premiums without providing any extra benefit.

By understanding the nuances of IDV and its impact on add-ons like RTI, you can make an informed decision that balances your budget and coverage needs.

So, the next time you renew your car insurance, take a closer look at the IDV - it’s more than just a number on your policy document!

Do you have any experiences with IDV adjustments or questions about choosing the right value? Share them in the comments below - we’d love to hear your thoughts!