What is an Insured Declared Value?

The Insured Declared Value or IDV is the maximum sum assured offered by the insurer in the event of total damage of the vehicle. Looked at from another perspective, IDV is the current value of the vehicle. If the vehicle gets completely damaged and cannot be used anymore, the insurer will offer an amount equal to the IDV of the vehicle. IDV is calculated on the manufacturer’s selling price, also known as the ex-showroom price in popular parlance. The insurance company deducts the depreciation from the manufacturer’s listed selling price to decide the IDV. The registration and insurance costs are not included while calculating the IDV. If the vehicle has parts that are not factory-fitted, the IDV of those parts will be calculated separately if insurance cover is required for them.

What is an IDV Calculator

IDV calculator is a free online tool that helps in ascertaining the IDV of a vehicle. It uses several components like the make, model, variant, year and month of purchase and the place where it was purchased to calculate the IDV of the vehicle. An IDV calculator also helps you get an idea of the amount you need to pay for your motor insurance plan.

How To Use an IDV Calculator?

IDV calculator has various aspects. The components needed to calculate IDV are:

  • Vehicle Type: The vehicle type plays an important role in the estimation of the IDV as the cost of two different types of vehicle is different and hence, the IDV will be different. You are required to choose between two and four-wheelers while selecting the vehicle type.  
  • Select state: You are required to provide the state in which the vehicle is registered.
  • Select year: The year of purchase of the vehicle is an important criterion for IDV. The year of purchase helps in knowing the age of the vehicle. IDV is calculated after taking into account the depreciation in the value of the vehicle. The depreciation increases with the age of the vehicle. The year of purchase is used to ascertain the age and the depreciation.
  • Select month: The month of purchase is used to fine-tune the age of the vehicle. The year provides a rough estimate. With the month, the exact age of the vehicle can be known.
  • Select make: You have to provide the name of the Original Equipment Manufacturer in this section.
  • Select model: Once the make of the vehicle is finalized, you have to choose the model of the vehicle. Each automobile company has several models in the market and the value of each model is different. The IDV varies with the model of the vehicle.
  • Select variant: Each model can have multiple variants with different engines and features. A variant with a more powerful engine and more features is priced higher and will have a higher IDV. The variant helps in ascertaining the exact value of the vehicle.

How Does An IDV Calculator Work?

The IDV value of the vehicle is calculated by removing the depreciation in the value of the vehicle from the manufacturer’s listed selling price. The depreciation allowed for a vehicle depends on the age of the vehicle. If the age of the vehicle is not more than 6 months, only 5% depreciation is allowed. If the age of the vehicle is between 6 months and a year, 15% depreciation will be assumed for calculating IDV. Between 1 year and 2 years, the depreciation increases to 20%. If the vehicle is 2 years old but less than 3 years old, the depreciation allowed is 30%. A depreciation of 40% is done in the value of the vehicle which is more than 3 years old, but less than 4 years. If the vehicle is over 4 years old but hasn’t exceeded 5 years, 50% depreciation in the value is considered for IDV.     

IDV Formula

The formula for calculating IDV is simple. Remember, IDV is calculated on the manufacturer’s price.

IDV = (Manufacturer’s listed price - depreciation) + (Cost of vehicle accessories - depreciation in the value of the parts)

The above formula is for vehicles that have added accessories that are not factory-fitted. If your vehicle doesn’t have extra accessories, the IDV formula will be

IDV = Manufacturer’s listed price - depreciation

Factors that Help decide IDV

There are several factors that impact the IDV. Read on to get a brief idea of them.

1. The year of purchase:

The age of the car is one of the most important factors for IDV. The depreciation increases with age and hence, the IDV decreases.

2. Make and model:

The selling price of every vehicle is different and it depends on the make and model of the vehicle. The IDV is indirectly influenced by the make and model of the vehicle.

3. City of registration:

The city of registration influences the IDV as a vehicle being used in a large city is prone to more risks than a vehicle running in a small town.

4. Standard depreciation:

The IDV is calculated based on the depreciation of the vehicle. A limited depreciation is allowed depending on the age of the vehicle.

Pros and Cons of High/Low IDV

There are certain pros and cons of high and low IDV.

If your vehicle has a high IDV, you will also have to pay a higher premium. On the other hand, if you want to shell out a smaller amount for the insurance of your vehicle, the IDV will be lower. A lower compensation in the case of theft or total loss can lead to losses.

Importance of IDV

IDV is a crucial component while buying a car insurance policy. The IDV determines how much compensation you will get in the event of theft or total damage. Additionally, it is also a crucial consideration for the premium charged from the policyholder. A high IDV will result in higher premium payment and hence, will increase the cost of the insurance.

IDV being a vital aspect for determining your motor insurance premium,remains important for your mental peace as well as your finances. This is because, the compensation in the event of theft or total damage will help you recoup the loss from the damage. You have to mention the correct IDV while purchasing or renewing an insurance policy.  

FAQs On IDV Calculator

  • ✔️What is the IDV of a new car?

    The IDV is the manufacturer’s price minus the depreciation. Ideally, there should be no depreciation in the value of a new car, but once the car is sold an amount is deducted as depreciation. If the car is less than 6 months old, 5% is deducted as depreciation. 

  • ✔️What is the IDV of a car standing just outside the showroom?

    As soon as the car leaves the showroom, depreciation comes into the picture. IDV of a vehicle just outside the showroom will be the company’s selling price minus 5% depreciation.

  • ✔️What is the best IDV for a vehicle?

    The closer the IDV is to the company’s selling price, the better it is for the policyholder. 

  • ✔️Why does the IDV of a car reduce every year?

    As the market value reduces every year due to the depreciation in the value with the car’s age and usage, the IDV of the car reduces each year. 

  • ✔️Why does IDV differ from one insurer to another?

    This happens because insurers usually reduce the IDV to attract customers by offering lower premium. Lower IDV means lower liability and lower claim settlement amount.

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