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How does the insurance company determine the market value of your vehicle? Understand the IDV formula in simple words

In today’s time, most of the people have a vehicle. Whether you keep a two wheeler or a four wheeler with you, you must have got it insured. While getting insurance, many people prefer to get Comprehensive Insurance because it is a kind of comprehensive insurance, in which you can get compensation for all kinds of losses caused by an accident. Comprehensive insurance policy provides coverage for damages caused to third party as well as damages caused to your vehicle due to calamities like earthquake, flood, theft, fire.

But the amount that the insurance company will pay for the damages caused to your vehicle depends on the IDV (Insured Declared Value) of your vehicle. While taking comprehensive insurance, the insurance company assesses the market value of your vehicle. This value is recorded as IDV. But the question arises that on what basis does any company decide the IDV of the vehicle? Let us tell you.

On what basis IDV is decided

There is also a fixed formula for determining the IDV. When a car is new, its price is kept equal to the showroom price, but the older the car gets, the more it costs. On the same basis, its IDV is then decided. While deciding the IDV, the year, month, model etc. of the vehicle are all taken into consideration and the value is derived accordingly.

  • Generally IDV of 6 months old vehicle will be fixed 5% less than the showroom price i.e. 95%.
  • If the vehicle is between 6 months and one year old, the IDV will be 15% less than the showroom price.
  • For old vehicles between 1 year and 2 years, 20% less than the showroom price is kept equal to 80%.
  • The IDV of a used vehicle between 2 years to 3 years is kept 30% less than the showroom price.
  • The IDV of a used vehicle between 3 years and 4 years is fixed at 40% less than the showroom price i.e. 60% of the showroom price.
  • The IDV of a used vehicle between 4 years to 5 years is fixed at 50% less than the showroom price.
  • For vehicles older than 5 years, the IDV is determined based on the market value, its servicing condition and body parts. Mostly in this case the price of the vehicle is fixed with the consent of the insurance company and the customer.

Why IDV is needed

IDV is required to avoid any kind of dispute between the insurance company and the customer. In fact, when it comes to compensation for the theft or destruction of the vehicle, the customer wants more amount as compensation and the company wants to give minimum compensation. In such a situation, the matter can get complicated. Therefore, the value of the vehicle in the form of IDV is fixed at the time of insurance. The price of the vehicle is decided on the basis of the current market price. In such a situation, when it comes to making an insurance claim, there is no dispute and the matter is settled easily.

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