When you buy or renew a car insurance policy, one of the most important terms you’ll come across is IDV (Insured Declared Value).
IDV stands for Insured Declared Value, and it represents the maximum claim amount you can receive in case of total loss or theft of the vehicle. It represents the current market value of your vehicle, after adjusting for depreciation and declared accessories.
The IDV plays a role in deciding the premium you will have to pay, and the amount for which your car is insured. Knowing the right IDV helps you balance premiums and payouts. If it's too high, you’ll overpay for insurance; if it's too low, you’ll be under-compensated during claims. Thus, let’s look at what IDV means in car insurance.
Here are some details about the Insured Declared Value in your car insurance -
IDV is used only in comprehensive or own-damage car insurance policies. It does not apply to third-party liability insurance.
In case of total loss or theft, the insurer settles the claim based on the IDV mentioned in your policy.
For partial losses (minor accidents), IDV is not directly used, but it acts as the upper limit of coverage.
The formula for calculating the Insured Declared Value (IDV) in car insurance is:
IDV = (Ex-showroom Price of the Car - Depreciation) + (Declared Accessories - Depreciation on Accessories)
Where,
Ex-showroom Price: Manufacturer’s listed selling price, excluding registration, road tax, and insurance.
Depreciation: Reduction in value due to age and wear & tear.
Accessories: Any extra fittings (e.g., music system, alloy wheels) you declare separately.
The depreciation rates of vehicles are an important factor that affects the IDV. The following are the general depreciation rates -
|
Age of Car |
% Depreciation for IDV |
|---|---|
|
Up to 6 months |
5% |
|
6 months to 1 year |
15% |
|
1 to 2 years |
20% |
|
2 to 3 years |
30% |
|
3 to 4 years |
40% |
|
4 to 5 years |
50% |
For cars older than 5 years or discontinued models, the IDV is usually fixed based on mutual agreement between you and the insurer, sometimes with the help of a car surveyor.
Here are the following factors that affect IDV -
Age & Depreciation - Older cars have lower IDV due to higher depreciation.
Make, Model & Variant - Premium models may retain higher market value.
Place of Registration - Cars registered in metro cities may fetch slightly different IDVs compared to smaller towns.
Declared Accessories - Additional fittings increase IDV if declared.
Condition & Mileage - Well-maintained, low-mileage cars may get better IDV.
Market Demand & Resale Value - Some models retain demand, impacting IDV positively.
The IDV directly impacts both your insurance premium and claim settlement. Here are some things that the IDV directly impacts -
Claim Settlement: In theft or total loss, the insurer pays only up to the IDV.
Premium Calculation: A higher IDV means a higher premium, and a lower IDV means a lower premium.
Resale Value Reflection: It shows the current market value of your car.
Renewals: With every renewal, depreciation lowers the IDV, so it changes annually.
Risks of Over- or Under-Estimating IDV
Thus, always strike a balance by keeping your IDV close to the real market value. |
Since the Insured Depreciation Value is an important factor for car insurance, you should understand it thoroughly. Here are some important points to keep in mind about the IDV -
The IDV is calculated based on the manufacturer’s listed selling price.
The IDV doesn’t include registration and insurance costs.
Add the values of the accessories and their depreciation value separately.
You cannot get an amount higher than the IDV under any condition.
Different insurance vendors might have different IDVs. Compare the policies offered by the top car insurance companies in India before deciding on one.
You must consider your IDV every year while renewing your insurance policy. Because IDV reduces every year due to depreciation.
You can negotiate within the insurer’s allowed range at renewal.
If you have bought a car on EMI, the correct IDV will help with insurance payout in case of loss of your vehicle.
Tools like IDV calculators can help you estimate the right value before finalizing.
The IDV depends on the make, model, age, and type of car. It also depends on the accessories you have added and the place of registration.
Here is an example to help you understand this better.
Suppose you bought a sedan with an ex-showroom price of ₹10,00,000. The car is 3 years old.
Depreciation (30% for 2–3 years) = ₹3,00,000
Value after depreciation = ₹7,00,000
Accessories worth ₹50,000, with 10% depreciation = ₹45,000
IDV = ₹7,00,000 + ₹45,000 = ₹7,45,000
If your car is stolen or declared a total loss, this is the maximum amount your insurer will pay.
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Knowing about the IDV value for car insurance is crucial for making informed decisions about your car insurance policy. It determines the maximum claim amount in cases of total loss or theft and also influences the premium you pay. If the cost of restoring your car after an accident is more than 75% of the IDV, the settlement might be equal to the IDV.
When renewing or buying a policy, always check how your insurer calculates IDV, compare across providers, and choose a value close to your car’s true market worth. For newer cars, consider add-ons like RTI or Zero Depreciation for maximum protection.
Please note that a higher IDV will lead to higher premium amounts, but your claim amount will be higher as well. But it is not advisable to claim an impractical IDV just to be compensated in case of an accident. Thus, keeping the IDV balanced will safeguard you from extra spending if you get in an accident.
The ideal IDV is close to your car’s current market value, ensuring fair premiums and sufficient coverage.
Yes. Insurers usually provide a range, and you can pick within that band at the time of purchase or renewal.
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This article is for informational purposes only and does not constitute financial or legal advice. Always consult with your financial advisor for specific guidance.
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