Insurance is like a spare tyre. You may not require it, but not having one is not an option.
  • How is Car Insurance Insured's Declared Value (IDV) Calculated?

    Before diving headlong into the topic, it is important to understand what exactly IDV stands for.

    What is IDV?

    Auto insurance acts as a financial shield in the case of accidents or damage caused to that particular vehicle. In terms of financial uncertainty such as this, it is important for customers to avail some sort of a safety net in the form of insurance plans. Auto insurance offers protection for both two wheelers and four wheelers. In the case of any damage caused to the vehicle, customers can claim a certain amount for the damages caused to the vehicle based on the policy’s terms and conditions.

    IDV or Insured’s Declared Value is nothing but the market value of the insured vehicle as fixed by the insurance company. All vehicles are depreciating assets, i.e their value only decreases over time. Customers, must therefore understand that, insurers treat all vehicles as a liability due to the depreciating factor. Therefore,when the company calculates the Insured’s Declared Value of the vehicle , it is initially done at the previous showroom price. But with each plan renewal, the IDV value reduces as it is adjusted for the vehicle’s depreciation factor. In the case of any damage or accidents, this value decreases even more.

    Basically IDV is the maximum amount that the customer can claim as compensation in cases of accident or even loss of car due to theft.

    A general schedule used to calculate IDV is as given below -

    Vehicle’s Age Depreciation percentage for determining IDV
    Over six months 5 percent
    Over six months but below a year 15 percent
    Over a year old but below two years 20 percent
    Over two years old but below three years 30 percent
    Over three years old but below four years 40 percent
    Over four years old but below five years 50 percent

    In case the car is over five years old, then the IDV is calculated based on discussions held by the insurance company. Factors that play a role in determining the price is the type of car, make and model, availability of the vehicle and so on. Vehicle dealer’s assessment is also sought while fixing the IDV.

    Sometimes, customers declare a low IDV as compared to the value on the market so as to save on the annual premiums but this might result in a lower claim in case of accidents or theft. Higher IDV may result in a higher claim amount. But, despite all factors, IDV is the maximum amount that customers can claim.

    How is IDV calculated?

    As mentioned previously, IDV is dependent on a number of factors such as age of the vehicle, make and model, availability and so on. For each year, the IDV of the car will be reduced as cars are depreciating assets. As per the ruling declared by the Insurance Regulatory and Development Authority, the maximum amount of IDV for a four wheeler is 95 percent of the ex showroom amount. Post six months, the value decreases.

    The calculation of IDV is the selling price listed by the manufacturer with depreciation being subtracted from it. Insurance cost and registration is excluded. Accessories that were not originally a part of the car will be calculated separately in case customers wish to insure them.

    The calculation is as follows -

    {[(Ex showroom or selling price listen by manufacturer) + (sales tax) + (accessories that are not a part of the car originally - depreciation value)] - (depreciation + insurance costs + registration costs)}

    Premium for the insurance plan depends significantly on IDV in addition to other factors.


    The maximum amount that can be claimed by customers is IDV under a particular insurance policy as compensation for losses due to accidents or theft. This is the market value of the car and post 6 months of purchase, the IDV value significantly decreases as depreciation value affects the same.

    Cars are depreciating assets and it is important for customers to ensure that the IDV value is calculated as soon as possible before depreciation reduces the IDV value significantly. Lower IDV values may save up in premium amount but will also result in a lower compensation value that will be provided.

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