When you buy car insurance, the Insured Declared Value (IDV) is one of the most significant yet often misunderstood parts of your policy. A lot of car owners either go with the default value the insurer recommends or change it without realising what it means. Picking the correct IDV matters a lot since it affects your premium, eligibility to file claims, and how much financial coverage you have.
Here's a helpful guide to help Indian car owners choose wisely.
What IDV Is in Car Insurance
Insured Declared Value (IDV) is your car’s current market value as assessed by the insurer and the maximum amount payable if it’s stolen or totally damaged.
It’s calculated by applying depreciation to the listed price and accessories.
IDV is set during purchase or renewal and directly impacts premiums—higher IDV means higher premium, and vice versa.
How IDV Gets Calculated in India
Insurance companies use a common formula:
IDV = Ex-showroom Price – Depreciation + Accessories Value
The ex-showroom price does not include registration costs, road tax, and insurance fees.
The Insurance Regulatory and Development Authority of India (IRDAI) regulates the depreciation percentages. Common depreciation rates are:
5% for vehicles up to 6 months old
6 months to 1 year: 15 percent
1 to 2 years: 20 percent
2 to 3 years: 30 percent
3 to 4 years: 40 percent
4 to 5 years: 50 percent
For cars older than five years, the IDV depends on an agreement made between the insurer and the owner.
Key Factors That Affect IDV Value
Many factors play a role in how insurers decide on the IDV:
Age of Vehicle and Depreciation: The older a car gets the lower its IDV tends to be because depreciation keeps increasing with time.
Brand Model, and Variant: Cars from luxury brands or popular models hold onto their value longer so they tend to have a higher IDV.
Condition And Mileage: Cars in good shape and with low mileage often sell for a better price.
Location Of Registration: Cars registered in big cities might have different price estimates. This depends on demand and usage.
Declared Accessories: Insurers might raise the IDV if you report aftermarket accessories.
Risks Of Picking The Wrong IDV
Choosing the wrong IDV might make you lose money or spend more than needed.
Overestimating IDV: Setting a high IDV raises your premium but won't lead to a bigger claim payout. Insurers still base claims on the actual market worth of the car.
Underestimating IDV: Setting the IDV too low cuts your premium. However, it will also mean less money if your car gets stolen or is damaged beyond fixing.
The ideal Insured Declared Value (IDV) should match your car's actual market worth when you buy or renew a policy.
Simple Tips To Pick the Right IDV
Below are some practical tips to choose the right IDV:
Check if the suggested IDV from your insurer matches your car's market resale price.
Try using online premium calculators to explore different IDV options.
Mention all your vehicle's accessories with accuracy.
Do not lower the IDV on purpose just to pay less premium.
Update your IDV every year when renewing since it goes down with depreciation.
Final Thoughts
Picking the right IDV means finding the right balance. It should not be too high or too low but should match your car's actual value. A good IDV keeps premiums reasonable, offers proper coverage, and makes claims easier to handle. When you buy car insurance, knowing this one number can make a significant difference to your financial protection.
To get advice that suits Indian drivers and to customise policies, companies like Chola MS Car Insurance can assist in setting an IDV that shows what your car is worth.
FAQs
Q1. Is a higher IDV always better?
No. A higher IDV leads to higher premiums. It’s better to keep it in line with your car's market value instead of making it high.
Q2. Can I adjust IDV during insurance renewal?
Yes, you can. Insurers let you modify it within a reasonable range as long as it matches the true value of your vehicle.
Q3. Does IDV affect every claim?
No, it mostly comes into play for theft or total loss claims. For smaller repairs, the settlement depends on repair costs and the terms of your policy.
Q4. Why does IDV go down every year?
It drops because a vehicle’s value decreases over time due to age, usage, and market demand.
Q5. Do accessories change IDV?
Yes, they do. Adding accessories can raise the IDV, but depreciation is applied to their value first.