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Insured Declared Value in Car Insurance & How to Calculate Vehicle IDV Value?

Ever wondered how much your car insurance would pay if it's stolen or totaled? That's where IDV comes in, the most misunderstood term in car insurance! 

IDV value means the maximum payout you'll receive if your car is stolen or written off. Hence, choosing the right IDV using IDV calculator is very important as it impacts both your claim amount and premium.

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What is IDV in Car Insurance?

We know there are terms in insurance that are difficult to understand but are extremely important to be acquainted with, one such term is IDV. The full form of IDV in insurance is ‘Insured Declared Value.’

IDV in car insurance refers to the current market value of your car. In other words, it is the amount your car would receive in today’s market. 

This IDV in car insurance helps your insurer, a.k.a us determine your claim amounts correctly during claim payments. Additionally, it also helps us determine the right premium price for your car insurance.

 

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Let’s understand with the help of an example,

Say you buy a new car for ₹10 lakhs, so your IDV at the time of purchase will be ₹10 lakhs since your car is new. 

However, as your car gets older, its value starts depreciating, resulting in a lower IDV. So, let’s say that after two years, your car’s worth is ₹6 lakhs; its IDV will also be ₹6 lakhs as per IDV calculator which considers various factors.

Also, remember that if you manage to sell your car for ₹7 lakhs, your car’s IDV will still be ₹6 lakhs. This means that IDV value is the amount at which your car is valued and not the value at which you can sell the car.

Why is IDV Important in Car Insurance?

Insured Declared Value is the soul of your beloved car insurance and is important in car insurance for three main reasons:

  • IDV in insurance determines the maximum claim amount you'll receive in case of theft or total loss. 

  • Your IDV decides the insurance premium of your car. If the IDV is high, the premium payable is higher. This is because your car’s IDV also determines the level of its risk. So, the higher your car’s IDV, the higher is its risk and consequently, this would demand a higher premium.

  • If your car is stolen or damaged beyond repair, the compensation you receive for your loss will exactly be the amount of what your IDV is. Therefore, always make sure your IDV is right, as per your car’s true value. 

IDV Value Calculator for Car Insurance

An IDV calculator is one of the most important insurance calculator tools, as it helps one determine not only the market value of their car but also helps in determining the right amount of premium you should be paying for your car insurance.

IDV calculator for car considers the ex-showroom price/current market value of the vehicle minus the depreciation on its parts. Also, the car registration cost, road tax and insurance cost are NOT considered while calculating it’s IDV.  

This further helps us (the insurer) determine the right amount payable during claims and God forbid, in cases where your car is stolen or damaged beyond repair.

How to Calculate IDV in Car Insurance?

You can use IDV calculator to calculate the actual Insured Declared Value or refer to the given formula. Also, IDV is calculated separately if your car is equipped with extra accessories or modifications that are not factory-fitted, as these will fetch an extra cost.  

  • IDV calculation if car is equipped with accessories

Insured Declared Value (IDV) = (Company’s listed price – the depreciation value) + (Cost of car accessories - the depreciation value of these parts)

  • IDV calculation if car is not equipped with accessories

IDV = Manufacturer’s registered price – the depreciation value

How to Calculate IDV of Car More than 5-Year-Old?

IDV calculation for car is done considering your car’s manufacturer’s selling price and the depreciation rate set by your insurer depending on the age of your car. The depreciation rate goes up to a maximum of 50% for cars up to 5 years old.

So, for a car older than 5 years, its IDV will be calculated by your insurer. They will decide the depreciation amount after thoroughly inspecting the car parts.

What is the Role of Depreciation in IDV Calculation?

Depreciation is an important factor that helps calculate IDV in car insurance. The higher the depreciation on your car parts, the lower its IDV. 

This is because as the car gets older, the depreciation on car value increases, and it loses its market value or IDV value over time. 

So, in case of theft or total damage to your car, you will receive a lower claim amount from the insurer.

Car Depreciation Rate

Depreciation is calculated based on the car depreciation rate, given in the table below:

Age of the Car Depreciation Rate 
6 months and below  5% 
6 months to 1 year  15% 
1 year to 2 years  20% 
2 years to 3 years  30% 
3 years to 4 years  40% 
4 years to 5 years  50% 
Above 5 years  IDV mutually decided by the insurance provider and policyholder 

Let us understand how the depreciation rates are used to calculate your car’s IDV with the help of the following example.

For example: Suppose your car is less than 6 months old, its current ex-showroom price is ₹100, and the depreciation rate as per the above given table is only 5%. 

  • Then after its purchase, as the car ages, the IDV value of car drops to ₹95.

  • It drops to ₹85 for vehicle age exceeding 6 months but not exceeding 1 year

  • For vehicle age exceeding 1 year but not exceeding 2 years, IDV becomes ₹80.

  • Then it drops to ₹70 for vehicle age exceeding 2 years but not exceeding 3 years, and so on.

  • Now, after 50% depreciation in its 5th year, the IDV falls to ₹50.

If your car is more than 5 years old, the IDV depends on the condition of the car – the manufacturer, model, and availability of its spare parts.

At the time of resale, your IDV is indicative of the market value for your car. However, if you have maintained your car well and is shining as good as new, you can always aim at a price more than your IDV might offer you. At the end of the day, it all boils down to how much love you have showered on your car.

How Does IDV Affect Your Car Insurance Premium?

The Insured Declared Value and your car insurance premium go hand in hand. This means, the higher your IDV is, the higher your car insurance premium – and as your vehicle ages and IDV depreciates, your premium also decreases.

Also, when you decide to sell your car, a higher IDV means you’ll get a higher price for it. Price may also be affected by other factors like usage, past car insurance claims experience etc.

So, when you’re choosing the right car insurance policy for your car, remember to make note of the IDV being offered, and not just the premium.

A company offering a low premium may be tempting, but this could be because the IDV on offer is low. In case of a total loss of your car, a higher IDV leads to higher compensations.

Advantages of Decreasing/Increasing IDV

  • High IDV: High IDV means high premium but you get a higher compensation at the time of loss or theft of your insured car.
  • Low IDV: Low IDV means low premium but this little saving on the premium can be a big loss for you at the time of loss or theft of your insured car. 

What Factors Help Determine Your Car's IDV?

  • Age of the Car: Since the IDV represents the market value of your car, the age of your car is extremely important to help determine the right IDV. The older your car is, the lesser will be its IDV and vice versa. 
  • Manufacturer Make and Model of the Vehicle: The make and model of your car is directly related to your IDV. For example; a car like a Lamborghini Veneno will have a higher IDV than that of an Aston Martin One due to the difference in their make and model.
  • City Registration Details: Your car registration details are available on your registration certificate. Also, the city where your car is registered has an impact on its insured declared value. The IDV of your car in a metro city may be less than its IDV in a tier-II city.
  • Standard Depreciation (As per Indian Motor Tariff): Your car’s value depreciates from the moment you drive it out of the showroom– and the percentage of its depreciation increases with each year. This too ultimately affects your IDV.

How to Choose the Right IDV for your Vehicle?

Choosing a policy with just the right IDV is crucial to get the most coverage, but at the same time, it may seem a daunting task. Read below to clarify if a car insurance policy with a higher IDV is better for you or one with a lower IDV. 

Car Policy with Higher IDV

You may opt for a car insurance policy with a higher IDV if:  

  • You own a new luxury car - It's advisable to safeguard your luxury car and its expensive, not readily available spare parts by opting for a higher IDV as then your insurance cover aligns with the expenses involved in repairing/replacing your expensive car parts whenever required. 

Also, getting a policy with a higher IDV will reduce the impact of depreciation on the claim amount and will ensure that you receive compensation closer to the actual market value of the car in case of theft or total loss. 

Car Policy with Lower IDV

You may opt for a car insurance policy with a lower IDV if:  

  • You own 5-year-old standard car - If you have been driving the same car for years with parts that are not expensive and readily available in the market, it's best that you choose an insurance policy with a lower IDV. Since the value of your older standard car has already depreciated and requires less expensive repairs/replacements, opting for a lower IDV ensures that you are not paying the premium that exceeds your car’s actual value. 

Also, if you plan to sell your car in the future, a lower IDV policy is advantageous as it will help you save costs on premiums while maintaining the necessary coverage.

Explain It Like I'm Five!

We're making insurance so simple, now even 5-year-olds can understand it.

Imagine you own a cool toy car. One day, you decide to find out how much money you would get if you sold it to your uncle. Your uncle looks at your toy closely and sees it's made of plastic, metal, and rubber, and considers how long you have been playing with it. Based on this, your uncle offers to give you ₹200 for the car. So, in this case, ₹200 is your toy car’s IDV. 

This IDV amount is the compensation you will get for the current value of your toy car if it's stolen or damaged.

FAQs about IDV in Car Insurance