When Rajat bought his first car, he was excited about hitting the road but overwhelmed by all the insurance jargon. One term that kept popping up was IDV or Insured Declared Value. What exactly did it mean? Why did it matter? And most importantly, how was it calculated?
Join Rajat’s journey to demystify IDV, understand its importance, how it impacts your car insurance premium and claims, and how you can calculate it easily before buying or renewing your policy.
Rajat’s Story: Learning the Value Behind IDV
Rajat bought a brand-new sedan and opted for comprehensive car insurance. When renewing after a year, he noticed his premium was lower. Curious, he asked his insurer why. That’s when he learned about IDV — essentially the current market value of his car, which declines as the car ages. This concept explained why his premiums dropped and how much he could claim in case of theft or total loss.
Understanding IDV helped Rajat make better choices on coverage and premiums, saving him money and giving peace of mind.
What is IDV (Insured Declared Value) in Car Insurance?
IDV is the maximum sum insured or maximum claim amount the insurance company will pay you if your car is stolen or written off (total loss). It represents your car’s current market value minus depreciation.
In simpler terms, IDV is like the price tag of your car according to the insurer—reflecting what your car is worth today, not what you paid for it new.
Why Does IDV Matter?
- Determines Maximum Claim: IDV is the highest amount you can get for theft or total loss claims.
- Impacts Premium: Higher IDV means higher premiums, and vice versa.
- Affects Your Coverage: If IDV is too low, you may be underinsured; too high, you may be paying more than needed.
- Reflects Depreciation: IDV decreases annually based on car age and usage as per IRDAI guidelines.
How Is IDV Calculated? Step-By-Step
The formula used by insurers generally follows:IDV=(Ex-showroom Price−Depreciation)+(Non-factory Accessories Cost−Depreciation on Accessories)IDV=(Ex-showroom Price−Depreciation)+(Non-factory Accessories Cost−Depreciation on Accessories)
Important points:
- Ex-showroom price excludes insurance, registration, road tax, and handling fees.
- Depreciation is applied based on car’s age following IRDAI’s fixed schedule.
- Non-factory (added) accessories depreciation is usually 50%.
- Factory-fitted accessories are included in ex-showroom price.
IRDAI Depreciation Schedule for IDV Calculation
| Age of Vehicle | Depreciation Rate (%) |
|---|---|
| Up to 6 months | 5% |
| Between 6 months – 1 year | 15% |
| 1 – 2 years | 20% |
| 2 – 3 years | 30% |
| 3 – 4 years | 40% |
| 4 – 5 years | 50% |
| Beyond 5 years | Negotiated between insurer and insured |
Example: Rajat’s Car IDV Calculation
Rajat’s sedan’s ex-showroom price (without insurance, registration) was ₹10,00,000. His car is 1.5 years old, so depreciation rate is 20%.Depreciation=10,00,000×20%=₹2,00,000Depreciation=10,00,000×20%=₹2,00,000
Assuming no accessories added:IDV=₹10,00,000−₹2,00,000=₹8,00,000IDV=₹10,00,000−₹2,00,000=₹8,00,000
So, ₹8 lakh is the maximum claim Rajat can get in case of total loss or theft.
Table: Sample IDV Values Over 5 Years for a ₹10,00,000 Car
| Car Age (Years) | Depreciation (%) | IDV (₹) |
|---|---|---|
| 0-0.5 | 5% | 9,50,000 |
| 0.5-1 | 15% | 8,50,000 |
| 1-2 | 20% | 8,00,000 |
| 2-3 | 30% | 7,00,000 |
| 3-4 | 40% | 6,00,000 |
| 4-5 | 50% | 5,00,000 |
FAQs Rajat Asked About IDV
Q1: Can I increase my car’s IDV?
A1: Yes, you can request a higher IDV by negotiating with the insurer, but your premium will increase accordingly.
Q2: What happens if IDV is too low?
A2: You may face insufficient claim payouts in total loss cases, leaving you undercompensated.
Q3: Does IDV include insurance and registration costs?
A3: No, these are excluded from IDV calculations.
Q4: Are accessories covered in IDV?
A4: Factory-fitted accessories are included; non-factory accessories are added separately after depreciation.
Q5: How often is IDV revised?
A5: IDV is recalculated at every renewal based on the car’s depreciation and market conditions.
Why Choosing the Right IDV Matters for You
Getting the right IDV means balancing between:
- Affordable premium: Too high an IDV inflates your premium unnecessarily.
- Adequate coverage: Too low risks underinsurance at claim time.
Always verify your car’s accurate market value and discuss IDV changes during policy purchase or renewal.
External Links for More on IDV
- Liberty Insurance: What is IDV? How to Calculate
- ICICI Lombard: Understanding IDV & Calculation
- Acko Insurance: What is IDV in Car Insurance?
- IFFCO-Tokio Explanation on IDV
Rajat’s Final Thoughts
“Now that I understand IDV, I can make smart choices for my car insurance. I know why my premiums change each year and how much I can expect to get in a claim. It’s not just a number — it’s the value that protects my investment and peace of mind.”