• How is Car Insurance Insured's Declared Value (Idv) Calculated?

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    In India, as per the Motor Vehicles Act, it is mandatory to insure every vehicle being used on road. It is a major priority and responsibility for every car owner to insure his/her own car with a third-party liability coverage. It provides a safety net for the policyholder/car owner against any future liabilities that may arise from any unfortunate events like man-made or natural calamities.

    Insured’s Declared Value (IDV)

    Insured’s Declared Value (IDV) is basically the present market value of your car. In short, it is the maximum sum that the insurer should pay under the car insurance policy. IDV reflects the highest sum you can claim in case of any liabilities arising due to partial/total destruction or theft of your vehicle during the policy period.

    IDV is calculated by the insurer based on the vehicle information provided by you before the policy period commences for the registered car.

    Insured’s Declared Value (IDV)
    Insured’s Declared Value (IDV)

    Calculation of IDV

    As per the India Motor Tariff, insurers use the following information to determine the IDV of your vehicle before insuring it:

    • Registration details of your car
    • Age of your car
    • Place where your car was registered as mentioned on the vehicle registration certificate
    • Date of purchase or registration of your car as mentioned on the vehicle registration certificate
    • Type of registration depending on the vehicle’s ownership (Individual owner or company owned)
    • Manufacturer, model and the make of your car
    • Cubic capacity based on model and manufacturer information
    • Vehicle description based on model and manufacturer information
    • Ex-showroom price (the sum of the actual price of your car + state tax for your car)

    The IDV for any car parts/accessories is fixed based on the ex-showroom price of that particular the car model.

    The IDV is calculated using the below formula:

    IDV = {[(Ex-showroom price) + (GST) + (Car accessories or parts that are not included in the ex-showroom price – depreciation of the these car accessories or parts)] – (Depreciation of car + Cost of registration + Insurance premium)}

    In case the repair/replacement cost for a vehicle exceeds 75% of its IDV, the vehicle is identified as a constructive total loss (CTL).

    Depreciation for IDV Calculation

    Among other factors affecting IDV, depreciation plays a major role in determining the IDV for every vehicle. Of course, every car undergoes depreciation due to the usual wear and tear that occurs with the continuous usage over a period of time. Depreciation, in fact, comes into play from the time your car is driven out of the showroom.

    The car insurance premium payable to the insurer is directly proportional to the IDV which means that as your vehicle ages, IDV will decrease resulting in a low insurance premium.

    • Depreciation of a Car with Age

    As per the Insurance Regulatory and Development Authority of India (IRDAI), the depreciation rate for a new vehicle will be at 5% during the first six months of purchase.

    The below data exhibits the depreciation rates fixed by the IRDA for vehicles with respect to their increasing age:

    Age of Car Depreciation Rate
    Within the first 6 months 5%
    For the next 6 months of the 1st year 15%
    During the 2nd year 20%
    During the 3rd year 30%
    During the 4th year 40%
    During the 5th year 50%
    Exceeding 5 years The rate of depreciation isn’t fixed. IDV can be calculated based on the mutual agreement between the policyholder and insurer after assessment of the vehicle.
    • Depreciation of Car Parts for Partial Loss Claim

    Depreciation of car parts come into play only when you claim for partial loss. The depreciation rates are applicable for the replacement of the following car parts:

    Car parts Age of the car Depreciation rate
    Rubber parts Not Applicable 50%
    Nylon parts
    Tubes
    Tyres
    Batteries
    Airbags
    Plastic parts
    Fibreglass parts Not applicable 30%
    Glass parts Not applicable 0%
    For all the other parts Within the first 6 months 0%
    For the next 6 months of the 1st year 5%
    During the 2nd year 10%
    During the 3rd year 15%
    During the 4th year 25%
    During the 5th year 35%
    Within the 6th and 10th year 40%
    Exceeding 10 years 50%

    What will happen if you declare a low IDV?

    For those new to car insurance, the Insured Declared Value of the car is basically the current market value of the car. For example, if the car owner wishes to sell the car or the car is stolen, then in the case of selling the car, the car owner should ideally set a price around the current IDV of the car and if the car is stolen, based on the Insured Declared Value of the car or the current market value of the car, the insurer will decide how much compensation has to be paid to the policyholder. For a car that is less than 6 months old, the IDV is at 5%, meaning that if the car is stolen, the car owner is compensated 95% of the ex-showroom price of the car. For a car that is between 4-5 years, the IDV increases to 50%, which is half the value of the car when it was first bought. So if the car is stolen during this period, the compensation that will be extended to the policyholder will be just 50% of the price the car was initially bought for.

    Now, policyholders need to know that the Insured Declared Value of the car also affects the premium of the policy that is set by the insurer. Now, if the policyholder declares an Insured Declared Value that the car actually is, the good side is that the insurer, due to the lower current market value, will set a premium that is lower as well. However, the drawback of setting the Insured Declared Value lower than it actually is that following a claim, the claim will be lower as well. As clearly highlighted above, the claim amount that the insurer will extend is subject to the IDV of the vehicle. So, if the policyholder declares a lower IDV than the actual value of his/her car, the claim will be lower and if the damages caused to the car are more than the claim amount, the policyholder will have to bear the expenses for the repairs from his/her own pocket.

    Keeping the above-mentioned points in mind, often insurers offer premiums for cheaper than their competitors. In the process, the insurer reduces the IDV as well and offers the premium for cheaper. This will reduce the claim amount following an accident as well. When purchasing a car insurance policy, car owners should choose one that offers a good premium cost and an IDV for the car that is suitable as well. For cars that are beyond 5 years old, since the IDV will be more than 50% of the value of the car, the insurer will set the premium and the IDV based on the current condition of the car. In such instances, the car owner can negotiate on the premium set by the insurer.

    What happens if the policyholder declares a higher IDV?

    As already mentioned, the IDV directly affects the claim amount following an accident and the premium that the insurer will set for the car insurance policy. If the car owner sets a higher Insured Declared Value that the actual IDV of the car, then the premium that will be set will be higher as well. Insurers usually do not mind if the IDV set by the policyholder is either 10%-15% higher or lower than the actual. However, if the insurer agrees to the IDV set by the policyholder which should be around the acceptable 10%-15%, then the premium will be set higher and the claim amount following an accident will be higher as well, and will reduce the out-of-pocket expense of the policyholder.

    That said, if the policyholder declares a much higher IDV than the actual IDV or current market value of the car, for example, an IDV 50% more than the actual market value of the car, then the value set will be regarded as fraud. In such cases, insurers will either reject any claim that the policyholder makes or even cancel the car insurance policy.

    How the IDV matters during car insurance renewal

    When it comes to renewing the car insurance policy, the premium that is set by the insurer is based on the Insured Declared Value of the car amongst several other factors. For cars, up to 5 years, the IDV is standardized as agreed by insurers across the country. It is 5% for cars less than 6 months old and up to 50% for cars between 4-5 years old. The lower the IDV of the car, the lower will be the premium, but the claim that the policyholder will receive following an accident or a mishap where the car has been damaged, will be lower as well. This means that if the expenses to repair the car exceed the claim amount, the policyholder will have to pay the balance amount from his/her own pocket. If the policyholder is renewing his/her car insurance policy and the car is more than 5 years old, then the policyholder will have to negotiate with the insurer on the premium that will be set for the car insurance policy. In usual cases, the condition of the car will determine the premium. However, since the premium is not completely based on just the Insured Declared Value (IDV) of the car, the policyholder can negotiate on a good enough premium. He or she should also ensure that the insurer does not reduce the premium less than what’s fair as it is already mentioned will affect the claim amount following an accident.

    Importance of IDV

    IDV, as mentioned before, is the present value of your car in the market. You can avail the best insurance depending on your car’s IDV. Hence, it is your responsibility as a policyholder to know the correct IDV, in case you are unaware of the correct IDV for your car, you might end up choosing an insurance plan with a low claim compensation.

    Key point to remember when calculating IDV

    • As the car owner, it is your primary responsibility when availing insurance to be aware of your car’s IDV.
    • Never quote a figure that is lower to your original IDV. If your quoted figure is less than the original value, your insurance premium to be paid will be low which will result in less insurance coverage.
    • Never quote a figure higher than your original IDV. A higher figure than the original IDV doesn’t guarantee you a higher price when you sell your car. Also, if the insurer finds out that you provided false information, your claim will be deemed invalid.

    *The customer reviews/feedback/opinions expressed on this website are solely of their authors and do not reflect, in any way, the view of BankBazaar Insurance.

    Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.

    How is Car Insurance Insured's Declared Value (Idv) Calculated? Reviews

    • New India Car Insurance
      "GOOD POLICY"
      0.5 4.0/5 "Great!"
      I have used the car insurance policy previously with the New India Assurance for approximately four years. I have not experienced with any claim with this insurance policy. The premium and the IDV value is satisfactory added on that the coverage is very good.
      Was this review helpful? 1
      , visakhapatnam
      Reviewed on Jan 30, 2019
    • Royal Sundaram Car Insurance
      "BETTER"
      0.5 3.0/5 "Satisfactory"
      There is no particular reason for taking the car insurance policy with the ROYAL SUNDARAM GENERAL INSURANCE but the premium and the IDV value what they have offered is satisfactory with this policy. The policy coverage is for zero depreciation.
      Was this review helpful? 1
      , visakhapatnam
      Reviewed on Jan 30, 2019
    • Royal Sundaram Car Insurance
      "EXCELLENT"
      0.5 5.0/5 "Blown Away!"
      The reason for taking the car insurance policy with the ROYAL SUNDARAM GENERAL INSURANCE is because of the lowest premium when compared to the others. I have not experienced with claim also the IDV value is good with this policy. The policy coverage is comprehensive.
      Was this review helpful? 0
      , delhi
      Reviewed on Jan 29, 2019
    • Future Generali Car Insurance
      "GOOD"
      0.5 5.0/5 "Blown Away!"
      I have used the car insurance policy with the Future Generali General Insurance previously for one year and i ave not experienced with no claim with this policy. The policy coverage is for zero depreciation also the premium and the IDV value is satisfactory.
      Was this review helpful? 0
      , thane
      Reviewed on Jan 27, 2019
    • Tata AIG Car Insurance
      "BETTER"
      0.5 5.0/5 "Blown Away!"
      The reason for taking the car insurance policy with the TATA AIG GENERAL INSURANCE is because the lowest premium when compared to the other policies. I have no claim experience but the IDV value is satisfactory with this policy. The policy coverage is for zero depreciation.
      Was this review helpful? 0
      , thane
      Reviewed on Jan 27, 2019
    • SBI General Car Insurance
      "GOOD"
      0.5 4.0/5 "Great!"
      I have previously used the car insurance policy with the Sbi General Insurance where i have used it for 3-4 years approximately. I have no claim experience with this policy added on that the policy coverage is for bumper to bumper. The premium and the IDV value is good.
      Was this review helpful? 0
      , ranchi
      Reviewed on Jan 27, 2019
    • National Insurance Car Insurance
      "BEST"
      0.5 5.0/5 "Blown Away!"
      I have used the car insurance policy with the National Insurance previously where i had a very good experience with this insurance policy. I had a claim where the customer service is very good but i am not sure about the policy coverage. Premium and the IDV value is very good.
      Was this review helpful? 2
      , chittoor
      Reviewed on Jan 23, 2019
    • New India Car Insurance
      "GOOD"
      0.5 5.0/5 "Blown Away!"
      The premium is lower with the New India Assurance where i have taken the car insurance with this where the best feature is that the IDV value is excellent. I have not experienced with any claim with this insurance policy. I had a very good experience with this policy.
      Was this review helpful? 1
      , mumbai
      Reviewed on Jan 23, 2019
    • Iffco Tokio Car Insurance
      "GOOD"
      0.5 4.0/5 "Great!"
      It is the with the good premium so i have taken the car insurance policy with the IFFCO TOKIO GENERAL INSURANCE. I had no claim experience but the IDV vale is good with this policy. Documentation process is simple, coverage i have no idea regarding that.
      Was this review helpful? 1
      , mumbai
      Reviewed on Jan 23, 2019
    • Future Generali Car Insurance
      "GOOD"
      0.5 5.0/5 "Blown Away!"
      I am using the car insurance policy with the FUTURE GENERALI GENERAL INSURANCE from last one year where i had a claim and it is satisfactory. It is a cashless claim where it settled in 1-2 weeks. Premium, IDV is satisfactory. Coverage is for bumper to bumper.
      Was this review helpful? 0
      , mumbai
      Reviewed on Jan 23, 2019
    • review Car Insurance
      "GOOD"
      0.5 5.0/5 "Blown Away!"
      I have experience with the Icici Lombard General Insurance for taking the car insurance policy is for two years. I had experienced with claim where i am not satisfied with this because it is cashless and it took long days. The premium and the IDV value is sufficient.
      Was this review helpful? 0
      , pune
      Reviewed on Jan 21, 2019
    • HDFC Ergo Car Insurance
      "EXCELLENT"
      0.5 5.0/5 "Blown Away!"
      The reason for taking the car insurance policy with the HDFC ERGO GENERAL INSURANCE is because of the lower premium when compared to the others. The IDV value is satisfactory with this insurance policy also the policy coverage is for bumper to bumper.
      Was this review helpful? 1
      , pune
      Reviewed on Jan 21, 2019
    • review Car Insurance
      "GOOD"
      0.5 4.0/5 "Great!"
      I have used the car insurance policy previously with the Icici Lombard General Insurance for 3-4 years approximately with this policy. The premium is nominal and the IDV value is satisfactory with this policy. The policy coverage is for bumper to bumper.
      Was this review helpful? 1
      , mumbai
      Reviewed on Jan 21, 2019
    • review Car Insurance
      "BETTER"
      0.5 4.0/5 "Great!"
      I have taken the car insurance policy with the Oriental Insurance where the premium is higher with this policy when compared to the others. The policy coverage is for bumper to bumper also the IDV value is satisfactory with this insurance policy.
      Was this review helpful? 0
      , bilaspur
      Reviewed on Jan 21, 2019
    • HDFC Ergo Car Insurance
      "EXCELLENT"
      0.5 4.0/5 "Great!"
      The reason for taking the car insurance policy with the HDFC ERGO GENERAL INSURANCE is because of the cashless branches are higher when compared to the others. I have not experienced with claim but the premium and the IDV value is satisfactory with this policy.
      Was this review helpful? 0
      , karnal
      Reviewed on Jan 21, 2019
    • Iffco Tokio Car Insurance
      "BETTER"
      0.5 5.0/5 "Blown Away!"
      There is no particular reason for taking the car insurance policy with the IFFCO TOKIO GENERAL INSURANCE and i had no claim experience with this policy. The policy coverage is for zero depreciation and also the premium and the IDV value is satisfactory.
      Was this review helpful? 0
      , amreli
      Reviewed on Jan 19, 2019
    • HDFC Ergo Car Insurance
      "GOOD"
      0.5 4.0/5 "Great!"
      I have taken the car insurance policy with the HDFC ERGO GENERAL INSURANCE where the documentation process is simple and easy to get the insurance policy. The premium and the IDV value is satisfactory with this policy but i have not experienced with claim.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Jan 19, 2019
    • New India Car Insurance
      "GOOD"
      0.5 3.0/5 "Satisfactory"
      I have taken the car insurance policy with the New India Assurance where the premium is satisfactory also the IDV value is satisfactory with this policy. I have not experienced with any claim with this insurance policy. the policy coverage is for zero depreciation.
      Was this review helpful? 0
      , yamuna nagar
      Reviewed on Jan 19, 2019
    • Royal Sundaram Car Insurance
      "GOOD"
      0.5 4.0/5 "Great!"
      ROYAL SUNDARAM GENERAL INSURANCE is the good insurance policy so i have taken my car insurance policy with this. The premium and the IDV value is satisfactory when compared to the others. The policy coverage is for zero depreciation with this policy.
      Was this review helpful? 0
      , yamuna nagar
      Reviewed on Jan 19, 2019
    • Tata AIG Car Insurance
      "GOOD"
      0.5 5.0/5 "Blown Away!"
      I am holding the car insurance policy with the TATA AIG GENERAL INSURANCE where the documentation process is very good and easy to get the policy. The premium and the IDV value is good also i had a claim which is cashless with this policy and i get within 1week.
      Was this review helpful? 1
      , new delhi
      Reviewed on Jan 19, 2019
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