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  • Should You Increase Your Car's Insured Declared Value(IDV)?

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    What is IDV?

    IDV or Insured Declared Value is one of the vital factors that determine your car insurance premium. It is the maximum insurance amount you can claim at the time of a mishap like accidents, theft, etc. In simple terms, IDV is the maximum amount you will receive when you raise a claim request at the time of a mishap. Your vehicle’s IDV depends on the present market value of your vehicle at any given time. Depreciation has a major influence on determining the IDV of your vehicle.

    Why you should know your Insured Declared Value?

    As IDV is the maximum sum that you can claim from the insurer at the time of a mishap, knowing your IDV will help you receive the current insured amount at the time of claim settlement. IDV is taken into account when it comes to own damage cover or comprehensive cover. The higher your vehicle's IDV, the higher will be your insurance premium. The insurance premium is in most cases 2%-3% of the IDV.

    Declaration of IDV

    Some of the car owners in order to save on the insurance premium, declare a lower IDV than the actual value. In such case, even though they save on the premium, they will not get less compensation during the claim settlement which may not be enough to cover the damages thus they will end up spending more from their own pocket .

    Sometimes car owners declare a higher IDV under the assumption that the compensation they receive at the time of your claim settlement will be higher and hence pay a higher insurance premium for the same at the time of policy purchase or renewal. They also use the quoted IDV for selling their vehicle at a higher price than the market value. But this is not ideal as the insurer along with the insured researches and determines the IDV for the car at the time of policy purchase or renewal.

    Hence, it is always best to be honest up front and quote the correct IDV at the time of policy purchase or renewal.

    Calculation of your vehicle’s IDV

    IDV of your car is determined based on the listed selling price of your car at any given point of time. The IDV is usually calculated at the time of policy purchase or renewal, either offline or online, after taking the depreciation of the car and its car parts into account. The IDV calculated is inclusive of the car accessories fitted in the vehicle.

    For vehicles that are older than 5 years and above, the IDV is determined based on a mutual agreement between the insurer and the policyholder. IDV depends on the vehicle’s condition, availability of spares for the vehicle and the vehicle’s make and model. The rates of depreciation for vehicles are fixed by the Insurance Regulatory and Development Authority of India (IRDAI) and is as follows:

    Age of the car Rate of Depreciation
    Until 6 months 5%
    6 to 12 months 15%
    1 to 2 years 20%
    2 to 3 years 30%
    3 to 4 years 40%
    4 to 5 years 50%