When buying or renewing your car insurance policy, one of the most important terms you’ll come across is Insured Declared Value, or IDV means in car insurance. While it might sound like complicated insurance jargon, IDV plays a significant role in determining not only your premium amount but also the maximum payout you can receive if your car is stolen or declared a total loss after an accident.
In simple terms, IDV is your car’s current market value—the amount your insurer agrees to pay you in case of a complete loss. It is calculated by adjusting the manufacturer’s selling price for depreciation and adding the value of any accessories you’ve installed. This means that as your car ages, its IDV reduces, directly impacting your premium and claim amount.
Unfortunately, many vehicle owners either overlook IDV or set it too high or too low without understanding the financial consequences. Choosing the right IDV of car insurance is about finding a balance—ensuring you’re adequately covered without paying more than necessary.
In this blog, we’ll break down how IDV is calculated, its impact on your premium, its role in claim settlement, and how you can select the most accurate IDV for your vehicle.
What is IDV in Car Insurance?
IDV full form in insurance: Insured Declared Value, refers to the current market value of your vehicle. This is the maximum sum insured your insurer will pay in the event of a total loss or theft.
In simple terms, think of IDV as the ceiling amount your insurer agrees to compensate you for in such extreme situations. This value is not random—it is calculated based on your car’s manufacturer-listed selling price, adjusted for depreciation over time.
Why does IDV not apply to third-party insurance?
IDV is applicable only in comprehensive and own-damage car insurance policies. These are among the most popular types of car insurance , each offering different levels of protection. In third party-only policies, your car’s value is irrelevant since they only cover damage or injury caused to others.
Many car owners compare IDV in car insurance vs return to invoice coverage. While IDV reflects your car’s depreciated market value, return to invoice coverage bridges the gap between the IDV and the original invoice price in case of total loss.
Here’s a quick comparison to clear the confusion:
| Feature | IDV (Insured Declared Value) | Return to Invoice (RTI) Cover |
|---|---|---|
| Coverage | Current market value of the car | Original invoice value of the car |
| Depreciation factor | Yes | No |
| Claim payout | Less than original cost | Equal to the purchase price |
| Applicable in | Comprehensive & OD policies | Add-on with a comprehensive policy |
Understanding IDV is the first step—next, let’s see why it plays such a crucial role in your car insurance policy and how it directly impacts your premium and claim amount.
Why is IDV Important in Car Insurance?
The importance of IDV in car insurance cannot be overstated, as it directly influences both your financial protection and your premium costs. It plays a vital role in three main aspects:
- Determines Claim Payout: In the unfortunate event of a total loss or theft, your insurer will rely on your IDV to calculate the compensation amount. This figure represents the maximum you can receive under your policy, making it the cornerstone of your coverage.
- Impacts Premium: Your chosen IDV has a direct effect on your premium. A higher IDV car insurance offers broader coverage but comes with increased premiums. Conversely, a lower IDV may save you money upfront but limits your payout potential, leaving you vulnerable during significant losses.
- Avoids Underinsurance: Setting the correct IDV ensures you are neither overpaying for unnecessary coverage nor underinsured in critical situations.
Think of IDV as the heart of your motor insurance policy—it keeps your financial safety net strong, ensuring you’re adequately compensated while maintaining cost efficiency.
How is IDV Calculated?
Understanding how to calculate IDV in car insurance is essential because it directly influences your premium, claim settlement amount, and overall coverage value. The IDV in car insurance is determined using IRDAI-approved guidelines, ensuring consistency across insurers.
Whether you’re buying a new policy or going for car insurance renewal, knowing the calculation process of IDV for car insurance renewal helps you avoid overpaying or being underinsured.
IDV Calculation Formula
The standard IDV calculation formula as per IRDAI guidelines is:
IDV = Manufacturer’s Listed Selling Price – Depreciation + Value of Accessories (if any)
This means your car’s original selling price is reduced by depreciation (based on age) and then increased by the declared value of any non-standard accessories. If you want an easy way to get an estimate, you can use an IDV value calculator provided by most insurers.
Role of Depreciation in IDV
Depreciation is the main factor that lowers your car’s IDV over time. The car insurance IDV depreciation rate is predefined by IRDAI, ensuring a fair and consistent reduction in value across insurers. As a vehicle ages, its market value drops, and so does its car insurance IDV value.
IRDAI’s IDV depreciation chart is followed across the industry:
| Age of Vehicle | % Depreciation on IDV |
|---|---|
| Less than 6 months | 5% |
| 6 months – 1 year | 15% |
| 1 – 2 years | 20% |
| 2 – 3 years | 30% |
| 3 – 4 years | 40% |
| 4 – 5 years | 50% |
| Above 5 years | Negotiable value |
This chart ensures that the importance of IDV in car insurance is balanced with realistic market values.
Manufacturer’s Listed Price & Accessories
- Manufacturer’s Price: This is the ex-showroom price of your car when it was new, excluding registration fees and road tax.
- Accessories: Any non-factory-fitted accessories, such as alloy wheels, premium infotainment systems, or anti-theft devices, can be included in your IDV if their value is declared during policy purchase or renewal.
By learning “What is IDV in car insurance and how to calculate IDV of a car?”, you can make informed choices when selecting the best motor insurance plan that aligns with your car’s value, keeping both premiums and claim payouts optimised.
Impact of IDV on Your Premium
IDV is one of the main factors affecting car insurance premiums, alongside factors like your driving history, location, and coverage type. Since IDV reflects the market value of your car, it also indicates the maximum liability your insurer would bear in case of theft or total loss. This direct link between IDV and premium means you need to choose your IDV wisely to strike the right balance between cost and coverage.
Why Premium Rises with Higher IDV
When the car insurance IDV value is high, the insurer’s potential payout in a claim also increases. This naturally results in a higher premium.
For example:
- IDV ₹8 lakh → Premium ₹14,000
- IDV ₹6 lakh → Premium ₹11,000
The difference may seem small at first, but over the years it can add up.
How Lower IDV Affects Premium and Risk
Opting for a lower IDV can lower your premium, but it also reduces the maximum claim amount. This can be risky in cases of total loss or theft, as you may not receive enough to replace your vehicle at its actual market value.
Balancing IDV with Premium Affordability
- Avoid undervaluing your car just to save on premiums.
- Choose an IDV close to the current market price.
Remember: IDV of car insurance directly impacts car insurance claim payouts, so striking the right balance is key for both protection and affordability.
How IDV Affects Claim Settlement?
The Insured Declared Value (IDV) directly influences how much you receive in the event of a total loss or theft claim. Since IDV represents your car’s current market value, it becomes the benchmark for the maximum claim amount your insurer will pay.
Understanding IDV is crucial when you need to claim car insurance for total loss or theft, as it determines the maximum payout you can receive.
Role of IDV in Total Loss and Theft Claims
In situations where your car is stolen or suffers irreparable damage, the insurer compensates you with the IDV stated in your policy—not the car’s original purchase price. This payout is the maximum liability your insurer will bear, and it is fixed at the start of the policy term.
Even if vehicle prices change during the year, your payout remains based on the declared IDV.
Impact of Incorrect IDV on Payout
Overstated IDV
- Results in a higher premium.
- Does not guarantee a higher payout beyond market value—insurers still follow depreciation guidelines.
Understated IDV
- Reduces your premium.
- It can cause a significant financial shortfall if your car is stolen or declared a total loss.
Ideal IDV for Your Car: How to Decide?
Choosing the right Insured Declared Value (IDV) is crucial—it determines how much you’ll receive in case of a total loss or theft, while also influencing your insurance premium. The goal is to strike a balance between adequate coverage and cost-effectiveness, and that starts with understanding the factors that shape your car’s IDV.
Key Factors Influencing IDV Selection
When deciding the right IDV for your car, consider:
- Age and depreciation rate: Depreciation lowers your car’s value each year, directly reducing its IDV.
- Market resale value: IDV should align closely with what your car could sell for today.
- Accessories installed: High-value add-ons like alloy wheels or advanced infotainment systems can increase IDV.
- Condition and mileage: Well-maintained cars with low mileage often command a higher IDV.
How Age and Depreciation Affect IDV
A brand-new car loses value quickly in its first few years, while older cars see a slower depreciation rate. After 5 years, insurers and policyholders typically agree on an IDV based on mutual assessment rather than a fixed formula.
- Results in a higher premium.
- Does not guarantee a higher payout beyond market value—insurers still follow depreciation guidelines.
Should You Go for High or Low IDV?
When deciding between a high or low IDV, it’s essential to weigh the trade-off between premium costs and claim payouts. Your choice should reflect both the current value of your car and your financial comfort with the premium.
- High IDV: Ensures better coverage but comes with a higher premium. Suitable for new or high-value cars.
- Low IDV: Saves on premiums but limits your payout. Works for cars nearing the end of their usable life or with low market value.
Best Practices to Set the Right IDV
Choosing the right IDV isn’t just about picking a number—it’s about ensuring your coverage truly matches your car’s worth while keeping premiums affordable. To make an informed decision:
- Refer to the IDV value calculator offered by insurers.
- Compare across providers to find the best motor insurance balance between IDV and premium.
- Avoid underinsuring your vehicle.
Common Myths Around IDV
Many car owners make decisions about their Insured Declared Value (IDV) based on assumptions that aren’t entirely true. These misconceptions can lead to paying unnecessarily high premiums or receiving inadequate coverage during claims. Let’s debunk some of the most common myths:
| Myth | Fact |
|---|---|
| IDV is the resale value of the car. | False. IDV is the maximum sum insured your insurer will pay in case of a total loss or theft. Resale value depends on buyer demand, vehicle condition, and negotiation, whereas IDV is calculated using the manufacturer’s listed price minus depreciation as per IRDAI guidelines. |
| Higher IDV always benefits the owner. | False. While a higher IDV car insurance can increase your payout potential, insurers will not pay more than the current market value of the vehicle at the time of claim. Declaring an inflated IDV only leads to higher premiums without any real increase in financial protection. |
| IDV applies to third-party policies. | False. IDV is relevant only in comprehensive or own-damage insurance policies, where your car’s value is essential for claim settlement. In third-party-only policies, the insurer only covers damages to third-party life or property—your vehicle’s value does not matter. |
| IDV can be changed anytime during the policy period. | False. IDV is fixed at the start of your policy or renewal. You can revise it only during purchase or renewal, not mid-term. |
| Older cars don’t need an accurate IDV. | False. Even older vehicles need the right IDV to avoid being underpaid in case of total loss. Low-balling IDV can leave you short during claims. |
Takeaway: Misunderstanding IDV can lead to overpaying premiums or being underinsured. Always set your IDV close to your car’s actual market value for the best balance between cost and coverage.
Conclusion
Understanding IDV in car insurance is not just about learning a technical term—it’s about making informed financial decisions. The Insured Declared Value is the foundation on which your premium, coverage, and claim settlement are built. Choosing the right IDV means you’re neither overpaying for unnecessary coverage nor leaving yourself exposed to financial risk in the event of a total loss or theft.
When setting your IDV, remember that it reflects your car’s current market value after accounting for depreciation. A value that’s too high inflates your premium without offering additional payout benefits. At the same time, a value that’s too low might leave you struggling to replace your vehicle after an unfortunate event.
If you want the best motor insurance plan, align your IDV with your vehicle’s fair value and review it carefully during each renewal. Use an IDV value calculator, compare policies across insurers, and factor in your car’s age, condition, and accessories.
In short, IDV is not just a number on your policy—it’s your car’s financial safety net. Make it accurate, make it fair, and you’ll enjoy peace of mind knowing you’re fully protected without overburdening your budget.
FAQ
IDV is calculated using your car’s manufacturer-listed price minus depreciation based on its age, as per IRDAI guidelines.
Yes. A higher IDV increases your premium because it raises the insurer’s potential payout.
No. IDV applies only to comprehensive or own-damage policies, not third-party insurance.
Yes, within a permissible range set by the insurer, but it should align with your car’s market value to avoid over- or underinsurance.
Get Quote
Insurance is the subject matter of solicitation. IRDAI Registration Number - 134. CIN # U66010MH2007PLC166770.
Developed & Maintained by Universal Sompo General Insurance Co.Ltd