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- IDV stands for Insured Declared Value.
- It represents the current value of your car for insurance purposes.
- It is the maximum amount payable by the insurer if the car is stolen or suffers total loss, subject to the policy terms.
- IDV is calculated using the car's ex-showroom price, depreciation, and eligible accessories.
- IDV reduces as the car gets older, which can also lower the own-damage premium.
- A very low IDV can reduce your premium but also reduce the potential payout for theft or total loss.
When you buy car insurance, you will come across the term IDV while comparing policies. It can look like just another number on the policy document. In reality, it has an important role in deciding how much you can receive if your car is stolen or damaged beyond repair.
IDV stands for Insured Declared Value. It broadly represents the current market value of your car for insurance purposes.
If you want to know more about IDV in car insurance, this guide will help you.
- IDV in Car Insurance at a Glance
- What Is IDV in Car Insurance?
- How Is IDV Calculated?
- How Does Depreciation Affect IDV?
- What Happens to IDV After 5 Years?
- Why Is IDV Important in Car Insurance?
- Does a Higher IDV Mean Better Car Insurance?
- How Does IDV Affect Your Car Insurance Premium?
- IDV vs Market Value: Are They the Same?
- What Should You Check Before Buying Car Insurance?
- Conclusion
- FAQs
IDV in Car Insurance at a Glance
| Particular | Details |
|---|---|
| Full form | Insured Declared Value |
| Purpose | Represents the insured value of the car |
| Major relevance | Theft or total loss |
| New car IDV | Generally 95% of ex-showroom price |
| Depreciation | Increases as the vehicle gets older |
| Registration cost | Not included |
| Road tax | Not included |
| Insurance premium | Not included |
| Cars over 5 years | Value is mutually agreed based on relevant factors |
What Is IDV in Car Insurance?
IDV is the maximum amount an insurer will pay for your car in case of theft or total loss, subject to the terms of the policy. It is mainly relevant to the own-damage part of car insurance.
Example: Suppose your car has an IDV of Rs 6 lakh. If the car is stolen and not recovered, the applicable claim payout cannot exceed the policy's IDV, subject to the policy terms.
Note: IDV is not the same as the price you paid for the car. It changes as the vehicle gets older.
How Is IDV Calculated?
IDV is generally calculated using the car's ex-showroom price after applying depreciation.
The value of eligible electrical and non-electrical accessories can also be considered after depreciation.
The basic calculation can be understood as:
Ex-showroom price applicable depreciation depreciated value of eligible accessories
Certain costs are not included in the IDV. These include:
- Registration charges
- Road tax
- Insurance premium
So, if you paid additional amounts for registration or road tax, these costs do not become part of your car's IDV.
How Does Depreciation Affect IDV?
As we have already mentioned, IDV is the current price of your car for insurance claim calculation. It generally decreases as the car becomes older, as depreciation applies.
The applicable depreciation slabs given by IRDAI (Insurance Regulatory and Development Authority of India) are:
| Age of Car | Depreciation |
|---|---|
| Under 6 months | 5% |
| 6 months to 1 year | 15% |
| 1 year to 2 years | 20% |
| 2 years to 3 years | 30% |
| 3 years to 4 years | 40% |
| 4 years to 5 years | 50% |
| Over 5 years | Based on mutually agreed market value |
What Happens to IDV After 5 Years?
For cars that are older than five years old, the standard age-based depreciation table is not applicable.
The IDV is based on a mutually agreed market value between the policyholder and insurer.
Factors that can influence this value include:
- Condition of the car
- Manufacturer
- Model
- Availability of spare parts
- Overall market value
This is why two older cars with similar ages can have different IDVs.
Why Is IDV Important in Car Insurance?
IDV matters because it sets the maximum claim amount for certain major losses.
It helps you to recover your car’s value if your car is:
- Stolen and not recovered
- Damaged beyond economical repair`
- Declared a total loss under the applicable policy terms
Does a Higher IDV Mean Better Car Insurance?
It is quite reasonable to understand that a higher IDV means:
- A higher claim amount in the event of theft or total loss.
- It can also result in a higher own-damage premium.
On the other hand, choosing a very low IDV can reduce the premium and the available claim amount. So, the aim should be to choose an IDV that reasonably reflects the current value of your car, rather than simply selecting the highest or lowest number.
How Does IDV Affect Your Car Insurance Premium?
IDV is linked to the premium for own-damage cover. As the value of the car decreases with age, its IDV generally decreases. This can also affect the own-damage premium.
However, IDV is not the only factor that determines your car insurance premium.
Other factors can include:
- Type of insurance cover
- Car model
- Location
- Add-ons
- Deductibles
- Previous claim history
- No Claim Bonus
Therefore, a lower IDV does not automatically mean that the overall policy will be cheaper by a fixed amount.
IDV vs Market Value: Are They the Same?
IDV and market value are related but are not the same thing.
Market value is the price your car could command in the market.
IDV is the value used by the insurer for determining the maximum payable amount for theft or total loss under the policy.
The IDV calculation takes factors such as the vehicle's age and depreciation into account.
What Should You Check Before Buying Car Insurance?
Before choosing a policy, check:
- IDV offered by the insurer
- Own-damage coverage
- Applicable depreciation
- Deductibles
- Policy exclusions
- Add-ons
- No Claim Bonus
- Premium
- Claim terms
Do not compare car insurance policies based only on the lowest premium.
A policy with a slightly lower premium can have a lower IDV. Another policy can offer a more suitable IDV with different terms.
Conclusion
IDV is an important part of car insurance because it determines the maximum amount payable for a stolen or totally damaged vehicle, subject to the policy terms.
The value is not fixed throughout the life of the car. It generally decreases with age because depreciation is applied. For cars over five years old, the value is determined based on factors such as the car's condition, model, and market value.
When choosing car insurance, do not focus only on getting the lowest premium. Check whether the IDV reasonably reflects your car's current value. This can help you avoid paying less today at the cost of a lower potential payout later.
FAQs
IDV stands for Insured Declared Value. It represents the value of your car for insurance purposes.
IDV sets the maximum amount the insurer can pay for the insured vehicle in case of theft or total loss, subject to the policy terms.
IDV is generally calculated using the car's ex-showroom price after applying depreciation. Eligible accessories can also be considered after depreciation.
No, registration charges, road tax, and insurance premiums are not included in the IDV calculation.
A new car generally has an IDV of around 95% of its ex-showroom price after applying 5% depreciation.
Generally, yes. IDV decreases as the car gets older because depreciation is applied.
For cars over five years old, IDV is based on a mutually agreed market value. The car's condition, model, manufacturer, and spare-parts availability can be considered.
No, a higher IDV can provide a higher potential payout for theft or total loss, but it can also increase the premium. The IDV should reasonably reflect the car's current value.
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