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When you buy car insurance, one of the primary things you figure out is how much premium you’d be paying. In India, third-party motor insurance is compulsory, and if you are wise you’d opt for comprehensive car insurance that covers all - from the mandatory third-party liability to own-damage (OD) and personal accident benefit. The latter would also mean a higher premium. Therefore, before you finalize on the terms of the car insurance policy, understanding the process of premium calculation is crucial. That’s where the insured declared value (IDV) comes in. So, what is IDV?

What is IDV?

IDV stands for Insured Declared Value. Simply put, it is the monetary value of the vehicle fixed during the commencement of the insurance policy period. In other words, it is the current market value of the car fixed by the insurer for the purpose of calculation of insurance coverage. This amount reflects the monetary extent to which your car is valued and insured, and therefore it changes at each renewal of the policy.

The IDV is basically equivalent to the sum insured amount of any insurance policy and changes during the time of policy renewal. This implies that the IDV will be the capping amount that will be considered during a claim settlement. Apart from directly influencing the premium you pay towards your car insurance, it also acts as the maximum consideration for your car in the process of a claim settlement.

How is IDV calculated?

Here’s the usual formula used for the calculation of the IDV:

IDV = (Manufacturer’s listed selling price- depreciation) + (Accessories that are not included in listed selling price-depreciation) and excludes registration and insurance costs.

As is clear from this, IDV is calculated on the basis of the invoice price, from which depreciation i.e reduction in the value of the car due to wear and tear, is reduced. The same is done to accessories of the car not included in the main price, and the sum of both these is IDV. The IDV of the accessories which are not factory fitted is calculated separately at extra cost if insurance is required for them.

The depreciation schedule followed is as mentioned here:

Age of Vehicle % Depreciation
Not exceeding 6 months 5%
Exceeding 6 months but not exceeding 1 year 15%
Exceeding 1 year but not exceeding 2 years 20%
Exceeding 2 years but not exceeding 3 years 30%
Exceeding 3 years but not exceeding 4 years 40%
Exceeding 4 years but not exceeding 5 years 50%

Beyond this, the IDV of vehicles aged over 5 years is calculated by mutual agreement between the insurer and the insured. Depreciation is not an effective evaluation mechanism once a car crosses the 5-year threshold. So, instead of depreciation, IDV of older cars is based on an assessment of the vehicle’s condition by surveyors, car dealers etc.

Sine IDV is the capping amount you will likely be paid in case of a mishap with your car, IDV functions as the sum insured and the premium you will pay is based on this amount.

Factors affecting IDV: age and depreciation

IDV of the car is mainly influenced by its age since depreciation increases proportionately as stated in the table before. Therefore, the IDV decreases over time.

Be careful and accurate with the IDV

It is vital that you disclose an accurate IDV for your car. If you think understating the value will help you save money on the premiums, remember that in the long run, it can prove costly since, during a claim, the IDV of the vehicle will be considered, not the current market value.

If you want a just claim/compensation for the car upon any mishap, keep the IDV as accurate and as close to the market value as possible. On similar lines, don’t overstate the IDV either, under the impression that the claim amount will be commensurate. A higher IDV will not necessarily fetch you a higher price when you sell your vehicle since there are other factors involved.


It is clear that the IDV should be as close to the market value of your car as possible to ensure that you receive just compensation upon damage, theft or loss of the car; and that you pay a fair premium in order to get this protection. To get car insurance you can visit Finserv MARKETS online which offers the Bajaj Allianz car insurance that provides comprehensive coverage against road-accidents, damages caused due to natural and man-made disasters. The Bajaj Allianz Car insurance is a robust insurance scheme where you can avail cashless claim facility across 4000+ garages, 24x7 roadside assistance facility and no claim bonus up to 50%.

To know more on car insurance in depth, you can check out these blogs:

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