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Does It Make Sense To Increase Your Car’s IDV?

By Vikas Chandra Das
21 July 2022, 11:46 AM

Complicated legalese and difficult technical words might dissuade the policyholder from going through the nitty-gritty of the insurance policy. This article seeks to simplify one such concept which forms the very basis of your insurance policy i.e. the Insured Declared Value.

The Insured Declared Value (IDV) is the maximum amount that the insurance company will pay as a claim amount in case of damage, theft, or total loss of the insured’s vehicle. It is the current market value of the car, including the cost of the accessories, after subtracting depreciation.

The IDV is determined based on –

  • Make of the car
  • Model of the car
  • City where the car was registered
  • Age of the car
  • Accessories of the car
  • Standard of depreciation

Why is the IDV Important?

The IDV is the single most important figure in your policy document due to the following reasons–

  • It is the amount that your car is insured for and forms the basis for all future claim settlements associated with the car.
  • It is the amount that the policyholder is likely to receive in case of total loss.
  • It also determines the value of the premium that one must pay for getting the benefits offered under the insurance cover. The IDV determines the risk premium only for own damages cover and not for third-party insurance. The premium amount and IDV have a direct relationship i.e. higher the IDV, the higher the premium amount.
  • It is also important at the time of renewal of the policy, the owner has the liberty to alter the IDV of the car.

How to Calculate Your IDV?

When the car is purchased the IDV is decided based on the selling price quoted by the manufacturer constructed on the brand and model of the car. The IDV reduces by 5% the minute the car is taken out of the showroom.

The IDV is calculated on the basis of the depreciation rates. This loss of endurance is calculated in the following manner –

Age of the vehiclePercentage of depreciation for fixing Insured Declared Value (IDV)
≤ 6 months5%
6 months – 1 year15%
1 year – 2 year20%
2 year – 3 year30%
3 year – 4 year40%
4 year – 5 year50%

To illustrate,

Your new Alto costs INR 5,00,000 when you purchase it from the showroom. Seven months later, you would like to sell the car and the IDV (factoring depreciation) is INR 4,25,000. However, on your wife’s plea you decide to defer selling the car. Now, two and a half years later, the car has an IDV of INR 3,50,000, which is significantly lesser than the value at which you purchased it at.

For cars which are older than 5 years, the IDV will be fixed on the basis of mutual agreement between the insurer and the insured. It is done after assessing the condition of the car by the authorised dealer or insurance surveyor.

Also, the Insurance Regulatory and Development Authority (IRDA) has assigned rates of depreciation for different parts of the car which will also influence the manner in which the depreciation is calculated thereby influencing the IDV values too.

Please note: the claim amount will be equal to the IDV in only two circumstances – firstly, if it is a case of theft and secondly, if the damage to the car exceeds 75% of the IDV.

Should You Check the IDV When Renewing Your Car Insurance Policy?

One must, after careful consideration, renew the car insurance with an insurance company that offers the most optimum IDV for a fair premium. One must not lower the IDV during the time of renewal just to pay a lower premium as this might expose the car to greater risks and financial losses. Neither must one resort to a higher IDV value to command a higher price for the car, for the IDV is the maximum amount that the insurer will pay in case of financial loss. It is prudent to get it insured for the entire IDV.

One must also be mindful of the fact that different insurers may place different values to the IDV of the car. It is advisable to check if the IDV offered and the premium charged is justifiable or not – one must negotiate in case those figures don’t seem agreeable.


As a policyholder who has fulfilled all his obligations towards the insurer, it is only fair that you seek the right IDV value for your car. With a reasonable amount of diligence, you will be able to secure the right value for your car – do not hesitate to invest time and effort into it.

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