When it comes to buying or renewing a car insurance policy, one of the most important terms you will see is insured declared value (IDV). IDV is the value that will be mentioned in your policy if a car is stolen or the respective amount that your insurance company is paying for a total loss. Many car owners either do not understand what IDV means or how it is calculated.
Having an IDV that is correctly figured is essential to ensure your car is insured at the actual market value—neither too much (which raises the premium) nor too little (which reduces the payout).
This article will help you understand how to calculate the IDV of a car from start to finish. It explains the formula, the standard depreciation rates, and the importance of the IDV calculation when you purchase or renew your policy.
What is IDV in Car Insurance?
IDV, or Insured Declared Value, is the maximum amount your insurer will compensate if your car is stolen or damaged beyond repair. Simply put, it represents the current market value of your vehicle — not the price you paid when you bought it.
When you purchase or renew your car insurance, the insurer uses the IDV to determine both your premium and the compensation amount in case of a total loss claim.
Here’s how it works:
- A brand-new car has a high IDV because its value hasn’t depreciated much.
- As your car ages, its market value drops due to depreciation, which in turn lowers the IDV.
Thus, the IDV continues to decrease each year, reflecting the vehicle’s age and condition.
Key Highlights of IDV in Car Insurance
- Basis for Claim Settlement: In the event of theft or total loss, IDV determines how much you’ll receive.
- Premium Calculation: A higher IDV means a higher premium, and vice versa.
- Depreciation-Driven: The IDV is calculated by applying standard depreciation rates based on the car’s age.
- Customisable: You can adjust the IDV slightly (within insurer-approved limits) to suit your preference, either to reduce your premium or to ensure maximum coverage.
So, before you finalise your policy, it’s crucial to understand what is IDV in car insurance and verify that it matches your vehicle’s actual market value.
Formula for Calculating IDV of Car
The Insured Declared Value (IDV) of your car is calculated using a simple formula that reflects the current market value of your vehicle, adjusted for depreciation.
Standard Formula for IDV Calculation:
IDV=(Ex-showroom Price of the Car + Cost of Accessories) - Depreciation Value
Let’s break this down for better understanding:
- Ex-showroom Price: This is the manufacturer’s listed price for your car (excluding registration, road tax, and insurance). It forms the base for IDV calculation.
- Cost of Accessories: If you’ve added non-factory accessories (such as alloy wheels, infotainment systems, or bumper guards), their cost can be added to the IDV. However, depreciation will also apply to these items.
- Depreciation Value: This refers to the decrease in your car’s value resulting from age, wear and tear, and market conditions. It is applied based on standard depreciation rates defined by the Insurance Regulatory and Development Authority of India (IRDAI).
Example: If your car’s ex-showroom price was ₹8,00,000 and it’s 3 years old, the standard depreciation applicable is 30%.
So, IDV = ₹8,00,000 - (30% of ₹8,00,000) = ₹5,60,000
If you’ve added accessories worth ₹20,000, the calculation becomes:
IDV = (₹8,00,000+₹20,000) - 30% depreciation = ₹5,74,000
The maximum claimable amount will be ₹ 5,74,000 if the car is stolen or irreparably damaged.
Step-by-Step Guide to Calculate Car IDV
Whether you’re checking the value manually or using an IDV calculator, following this step-by-step approach will help you determine the most accurate figure for your car.
Collect Vehicle Details
Gather all the basic information about your car, including:
- Car make, model, and variant
- Year of manufacture
- Registration number and location
- Engine and chassis number
- Fuel type (petrol, diesel, CNG, or electric)
- Ex-showroom price at purchase
Check the Current Market Value of Your Car
Your car’s current market value is the approximate price it would fetch if sold today. It’s influenced by factors such as:
- Age and mileage
- Condition (mechanical and visual)
- Brand reputation and demand in the resale market
- Service history and accident record
You can check the current market price through:
- Online used-car portals
- Dealership evaluations
- Car valuation tools on insurance aggregator websites
This market value serves as the base reference for how to find the IDV of a car.
Find the Ex-showroom Price of the Car
You need to know the car’s ex-showroom price, i.e., the official price (before registration and taxes) declared by the manufacturer at the time of purchase. The price serves as the starting point for calculating depreciation and determining your car’s IDV.
Check Depreciation Rate as per the Car’s Age
Depreciation is the key factor in calculating IDV. The older your car, the higher the depreciation applied to its value. According to IRDAI guidelines, the depreciation rates for IDV calculation are standardised. Understanding this rate helps you learn how to calculate the IDV of an old car accurately.
Apply IDV Calculation Formula
Once you have the ex-showroom price and applicable depreciation rate, apply the formula:
IDV = (Ex-showroom Price+Cost of Accessories) - Depreciation Value
Example: Let’s say your 4-year-old car had an ex-showroom price of ₹10,00,000. The applicable depreciation rate is 40%.
Depreciation Value = 40% x ₹10,00,000 = ₹4,00,000
So, IDV = ₹10,00,000 - ₹4,00,000 = ₹6,00,000
This ₹6,00,000 is your car’s Insured Declared Value, i.e., the compensation you’ll receive in case of total loss or theft.
Adjust for Accessories and Modifications
If you've added aftermarket accessories or modifications not included in the original invoice, such as alloy wheels, music systems, or custom interiors, you can include their value while calculating IDV. However, depreciation applies here too.
Compare IDV Offered by Different Insurers
Different insurers may offer slightly different IDV values for the same car. This happens because:
- Each insurer uses its own IDV estimation model.
- They might factor in brand popularity, spare part availability, and market demand.
When comparing quotes for the best motor insurance, don’t just pick the lowest premium. Always check the IDV offered. A lower IDV may reduce your premium, but will also reduce your payout during a claim.
Verify IDV with the Online Car IDV Calculator
You can use an IDV calculator available on most insurance or aggregator websites. Here’s how to calculate the IDV value of a car using online tools:
- Visit your insurer’s calculator page.
- Enter your car’s registration number or model details.
- Provide manufacturing year and fuel type.
- The tool automatically applies depreciation and displays your car’s IDV range.
This is the fastest and most accurate way to check the IDV without manual calculations, especially if you want to know how to calculate the IDV of a used car before buying or renewing insurance.
Finalise the IDV Value for Your Policy
Once you’ve verified the calculations, finalise your IDV within the insurer’s permissible range. Usually, insurers allow a slight variation from the standard IDV.
- Opting for a slightly higher IDV provides better coverage, but it also increases the premium.
- Choosing a lower IDV reduces your premium, but it can also limit your claim amount.
For long-term savings and adequate protection, choose a realistic IDV that strikes a balance between affordability and sufficient coverage.
Car Depreciation Rate Table for IDV Calculation
Depreciation plays a crucial role in determining your car’s IDV for car insurance purposes. It accounts for the natural decline in value due to age, wear and tear, and market conditions. IRDAI has set standard depreciation rates that insurers generally follow when calculating IDV.
Here’s a comprehensive car depreciation rate table for easy reference:
| Age of Car | Depreciation Rate (%) | Remarks |
|---|---|---|
| 0 – 6 months | 5% | Brand-new cars; minimal depreciation |
| 6 months – 1 year | 15% | First-year usage, minor wear |
| 1 – 2 years | 20% | Moderate usage; IDV reduces accordingly |
| 2 – 3 years | 30% | Significant depreciation due to age |
| 3 – 4 years | 40% | Older car; IDV continues to decline |
| 4 – 5 years | 50% | Maximum standard depreciation applied |
| Above 5 years | Negotiable | The insurer decides based on the car's condition and market value |
Notes on Using the Depreciation Table:
- Applies to the ex-showroom price of the car.
- Value of accessories may differ (30% - 50% As it depends as per the vehicle age as mentioned in the table.)
- Accurate IDV calculation ensures your car insurance payout matches the real market value of your vehicle.
- For used cars, verify both the actual market price and age to avoid under- or over-insuring.
By combining the ex-showroom price, accessory value, and the appropriate depreciation percentage, you can precisely learn how to calculate the IDV of an old car, ensuring fair coverage without paying unnecessary premiums.
Why Accurate IDV Matters in Car Insurance?
Setting the correct IDV in car insurance is not just a procedural step — it directly impacts your coverage, claim settlement, and premium costs.
Let’s explore why getting the IDV right is crucial for every car owner.
Determines Claim Settlement Amount
The IDV represents the maximum amount payable by the insurer in case of theft or total loss.
- Overestimating IDV: Leads to higher premiums but doesn’t increase your payout proportionally if the car is older.
- Underestimating IDV: Reduces your premium but may result in inadequate compensation during a claim.
Accurate IDV ensures your car is fully covered without overpaying on premiums.
Influences Premium Calculation
The premium for comprehensive car insurance is calculated based on the car’s IDV and other factors, including location, engine capacity, and optional add-ons.
- Higher IDV → higher premium
- Lower IDV → lower premium
By calculating IDV correctly, you pay a fair premium that reflects your car’s actual value, optimising your insurance cost-effectiveness.
Helps Avoid Underinsurance
Underinsurance occurs when your car’s IDV is set too low.
- This leads to a reduced claim payout in the event of major accidents or total loss.
- Accurate IDV protects you from financial loss and ensures proper coverage for repairs or replacement.
Accounts for Accessories and Modifications
If your car has aftermarket upgrades, a proper IDV calculation includes their current depreciated value. Failing to address these can leave valuable additions unprotected in the event of damage or theft.
Ensures Compliance with IRDAI Guidelines
Insurance Regulatory and Development Authority of India (IRDAI) mandates fair IDV practices. Insurers are required to follow depreciation rates for uniformity and transparency. Accurate IDV calculation ensures compliance and avoids disputes during claims.
Maximises Savings and Coverage
A carefully calculated IDV strikes the perfect balance between premium affordability and adequate coverage.
- Protects your car for its real market value
- Prevents overpayment on the premium
- Maintains claim eligibility for both minor and major damages
Understanding how to calculate the IDV of a car ensures your insurance policy is both economical and effective, providing peace of mind to every car owner.
Conclusion
Calculating the IDV of your car is a crucial step in securing comprehensive and cost-effective car insurance coverage. By following a structured approach of collecting vehicle details, checking ex-showroom price, applying depreciation rates, and verifying with an IDV calculator, you can accurately determine your car’s IDV. This ensures that your car insurance premium is fair and that you receive adequate compensation in case of theft or total loss.
Understanding how to calculate IDV of a new car, an old car, or a used car empowers you to make informed insurance decisions, save on premiums, and safeguard your vehicle for the long term.
A well-calculated IDV not only optimises your insurance cost but also provides peace of mind, knowing that your car is adequately covered against unforeseen events.
FAQ
IDV decreases with the car’s age, depreciation, wear and tear, mileage, and sometimes location-based adjustments. Older cars have lower IDV due to higher depreciation.
Yes. Most insurers and aggregator websites offer an IDV calculator, allowing you to enter your car’s details and obtain the IDV instantly.
Not exactly. IDV represents the insurance value, which is influenced by standard depreciation rates. In contrast, resale value depends on market demand, condition, and buyer preferences.
The older the car, the higher the depreciation applied, which reduces the IDV. For example, a 5-year-old car typically has 50% lower IDV than a new car of the same model.
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