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IDV, which stands for Insured Declared Value, refers to the maximum amount that an insured individual can receive from their insurance provider under a car insurance policy. It represents the maximum coverage value that your insurance provider will pay you in case of unfortunate events affecting your vehicle. 

How is IDV Calculated?

The IDV is determined based on factors such as the car’s make, model, variant, and age. When a car is manufactured, the manufacturer assigns an initial IDV without accounting for any depreciation. However, during the purchase or renewal of insurance, the car owner declares the IDV. This declared value significantly influences both the premium you pay for the policy and the claim settlement limit. 

 

You can also get some of your vehicle’s accessories insured as well, but if these are additions made by you and not the original manufacturer, a separate Insured Declared Value will be calculated for them. Remember that the insurance and registration costs of the vehicle are not included in the IDV calculation.

 

The insurer and the insured are required to come to a mutual agreement regarding the insured vehicle’s Insured Declared Value. Tools like the IDV calculator on Bajaj Markets have made it very easy for policyholders to know the real IDV of their vehicles, thus making claim settlement stress-free and quick.

Depreciation Schedule

Age of the Vehicle

Rate of Depreciation (for IDV)

Up to 6 months

5%

6 - 12 months

15%

1 - 2 years

20%

2 - 3 years

30%

3 - 4 years

40%

5 years

50%

Factors That Help Determine IDV

  •  Age of the vehicle:

The age of your vehicle is a significant factor; the older your vehicle the lower the Insured Declared Value as the depreciation rate will be higher.

  •  Make and model of the vehicle:

The brand and model of your car play a role in determining the repair expenses in case it gets damaged. So vehicles made by BMW will have higher IDV than vehicles made by Hyundai.

  • Depreciation rate:

The market value of your car begins depreciating the minute you buy it. The aforementioned depreciation rate schedule is used to calculate your Insured Declared Value.

  • Geographical area:

The state or city where your vehicle is registered is another factor. The IDV for vehicles registered in urban regions will be different from the Insured Declared Value for those in more remote areas.

Impact of IDV on Your Car Insurance Policy

The Insured Declared Value of your vehicle is a crucial determinant of how much your insurance policy will cost you and what your coverage will look like. The higher the car Insured Declared Value, the greater the insurance premium and the same is true for lower IDV and lower premium. Now, it might seem like setting your Insured Declared Value low will be beneficial for you, but you should avoid falling into this trap. Whilst a lower IDV may result in lower premiums, it will also mean that should something happen to your vehicle, the insurance coverage will be less than what the vehicle’s market value is, which is a negative for you.

What is IDV in Insurance

IDV for Older Vehicles

As the insured vehicle gets older, the premium of the damage cover goes on decreasing according to depreciation.

 

For vehicles that are aged 5 years or more, the Insured Declared Value depends on:

  • The brand/manufacturer

  • Vehicle model

  • Availability of spare parts

Advantages and Drawbacks of Higher & Lower IDV

Type of IDV

Pros

Cons

Low IDV

Lower premium

Lower compensation for total damage, theft or loss of vehicle

High IDV

Higher compensation for total damage, loss or theft of vehicle

Higher premium

FAQs

What is IDV in Car Insurance?

  • IDV stands for Insured Declared Value. It represents the maximum amount you’ll receive from the insurer if your insured car is damaged beyond repair or stolen.

  • Your insurer offers the IDV when the car is a total loss due to severe damage.

  • The IDV directly impacts the premium you pay—higher IDV means higher premium.

How is IDV Calculated?

  • When you buy a new car, the IDV is based on the manufacturer’s selling price, accounting for depreciation.

  • The formula to calculate IDV is:

    • With Accessories: IDV = (Manufacturer’s Selling Price – Depreciation Cost) + (Accessories Cost – Depreciation of These Accessories)

    • Without Accessories: IDV = Manufacturer’s Selling Price – Depreciation Cost.

What Factors Influence IDV?

  • Age of the Car: Older cars have a lower IDV due to depreciation.

  • Make, Model, and Variant: Luxury or high-end models tend to have higher IDVs.

  • Geographical Location: Riskier areas may impact the IDV.

  • Add-Ons and Accessories: These affect the IDV.

  • No-Claim Bonus (NCB): A good NCB record positively influences IDV.

Why Should I Calculate IDV Accurately?

  • Understating the IDV reduces your claim amount.

  • Overstating it increases the premium.

  • Providing an inaccurate IDV could lead to claim rejection.

What Is IDV in Simple Terms?

  • IDV is the current market value of your car.

  • It’s the assured compensation amount the insurer pays for theft, damage, or total loss.

  • Calculated by subtracting car depreciation from its selling price.

What Is the Full Form of IDV?

  • IDV stands for Insured Declared Value.

  • It’s the maximum claim your insurer will pay for severe damage or theft.

What Is the Standard Car Depreciation Rate for IDV Calculation?

  • Depreciation rates vary based on the car’s age:

    • Up to 6 months: 5%

    • 6 months to 1 year: 15%

    • 1 to 2 years: 20%

    • 2 to 3 years: 30%

    • 3 to 4 years: 40%

    • 4 to 5 years: 50%

    • 5 years and beyond: Negotiable. 

How Does IDV Determine Car Insurance Premium?

  • Higher IDV leads to a higher premium.

  • Striking the right balance ensures adequate coverage without overpaying.

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