When you buy or renew a vehicle insurance policy in India, one term you will always come across is IDV, or Insured Declared Value. While it may seem like just another technical insurance term, IDV plays a critical role in determining both your insurance premium and the amount you receive during a claim. Understanding IDV helps you avoid under-insurance, unnecessary premium costs, and unpleasant surprises during claim settlement.
This guide explains IDV in simple terms, how it is calculated in India, and why choosing the right IDV is essential for every car and bike owner.
What Does IDV Mean?
Insured Declared Value (IDV) is the maximum amount an insurance company will pay if your vehicle is stolen or declared a total loss due to severe damage. In simple words, IDV represents the current market value of your vehicle as assessed at the time of purchasing or renewing a comprehensive motor insurance policy.
IDV is not the same as the vehicle’s purchase price. It accounts for depreciation based on the vehicle’s age, condition, and usage. Once fixed, the IDV remains unchanged throughout the policy period.
Why Is IDV Important?
IDV is a cornerstone of motor insurance because it directly impacts both the financial protection you receive and the cost of your policy.
Maximum Claim Amount: In cases of total loss or theft, the insurer will settle the claim based on the IDV mentioned in your policy document.
Impact on Premium: A higher IDV increases the insurer’s risk and results in a higher premium, while a lower IDV reduces the premium but also lowers claim payout.
Avoids Under-Insurance: Choosing an unrealistically low IDV may save premium in the short term but can lead to significant financial loss during claims.
Financial Security: A correctly chosen IDV ensures your vehicle is adequately protected against major losses.
How Is IDV Calculated?
IDV calculation in India follows a standard depreciation-based approach aligned with industry guidelines.
Basic Formula:
IDV = Manufacturer’s Listed Selling Price – Depreciation
Registration charges, road tax, and insurance costs are excluded from this calculation.
Including Accessories:
If your vehicle has non-factory fitted accessories, their depreciated value can be added to the IDV separately. Factory-fitted accessories are already included in the listed price.
Standard Depreciation Rates in India
Depreciation is applied based on the vehicle’s age:
- 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%
- Above 5 years: Mutually decided based on market value
For vehicles older than five years, insurers and policyholders generally agree on the IDV after evaluating the vehicle’s condition and resale value.
Example of IDV Calculation
Consider a car with an ex-showroom price of ₹10,00,000 that is 2.5 years old.
Applicable depreciation: 30%
Calculated IDV: ₹7,00,000
This amount becomes the maximum compensation payable if the vehicle is stolen or declared a total loss during the policy period.
Factors That Affect IDV
Several factors influence the final IDV of a vehicle:
- Age of the vehicle
- Make and model
- Overall condition and maintenance
- Market demand and resale value
- Type and value of additional accessories
Frequently Asked Questions About IDV
1. Is IDV the same as the car’s purchase price?
No, IDV is not the purchase price. It represents the current market value of the vehicle after accounting for depreciation.
2. Can I choose my own IDV?
Yes, insurers usually offer a range within which you can select the IDV. Choosing too low or too high can negatively affect claims or premiums.
3. Does IDV apply to third-party insurance?
No, IDV is only relevant for own-damage cover under comprehensive motor insurance policies.
4. Is IDV applicable for bike insurance?
Yes, the concept of IDV applies to both car and two-wheeler insurance policies.
5. Does IDV change during the policy term?
No, once fixed at the time of policy issuance or renewal, IDV remains constant for the entire policy period.
6. What happens if my vehicle is stolen?
If the vehicle is not recovered, the insurer pays the IDV amount after completing claim formalities and deductions.
7. Should I increase IDV for better protection?
Increasing IDV raises the premium and does not always reflect true market value. It is best to choose a realistic IDV.
8. Are accessories included in IDV?
Factory-fitted accessories are included, while non-factory accessories are added separately after depreciation.
9. How does IDV affect insurance renewal?
IDV reduces every year due to depreciation, which usually results in a slightly lower premium at renewal.
10. Is IDV mandatory in comprehensive insurance?
Yes, declaring an IDV is mandatory for own-damage coverage under comprehensive motor insurance.
Conclusion
IDV, or Insured Declared Value, is one of the most important elements of motor insurance in India. It determines how much protection your vehicle truly has and how much compensation you can expect during a major claim. Choosing the right IDV ensures balanced coverage, fair premiums, and peace of mind.
Before finalizing your policy, always review the IDV carefully and ensure it reflects the actual market value of your vehicle. At Policysaarthi, informed decisions today lead to better protection tomorrow.
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