What is Insured Declared Value (IDV) in Motor Insurance?

Key Takeaways:

• IDV is the maximum amount an insurer will pay for vehicle damage or theft. 

• IDV directly affects both your premium and potential claim payout. 

• It is crucial to choose the correct IDV to balance coverage and cost. 

When you buy or renew vehicle insurance, a number in your policy determines, often unnoticeably, how much protection you can actually have. It determines both the premium you pay and the payout you receive, yet most people hardly notice it.

So, what is IDV in bike insurance, how does it differ from IDV in car insurance and why does it matter? Many policyholders ignore this number until a claim arises, but by then it’s often too late. To secure the full value of your coverage, it's essential to understand how IDV works.

IDV stands for Insured Declared Value. It represents the maximum amount your insurer will pay if your vehicle gets damaged or stolen. It reflects your car or bike’s current market value and adjusts annually for depreciation. 

Knowing what is IDV in car insurance depends on the following factors:

• Making charges

• Model

• Variant

• Age

• Condition

For new cars, the IDV closely matches the ex-showroom price. As your car ages, insurers apply standard depreciation rates each year following guidelines set by the IRDAI (Insurance Regulatory and Development Authority of India).

For example, consider a car you bought for ₹10 lakh, which is now one year old. According to IRDAI rules, insurers will apply a 15% depreciation for vehicles between 6 months and 1 year old. This affects the IDV as follows:

• Original Price: ₹10 lakh

• Depreciation Applied: 15%

• Current IDV: ₹8.5 lakh

This means that in case of theft or total loss, your insurer will pay a maximum of ₹8.5 lakh, provided you meet all their terms and conditions. 

Selecting the correct IDV will help you balance insurance costs with financial protection, as it can affect both your claims and premiums in the following ways:

• Maximum Claim: Your insurer will pay up to the IDV in case of theft or damage. 

• Proper Coverage: Choosing the right IDV will ensure you can receive adequate compensation. 

• Premium Costs: Lowering the IDV will reduce your premium, but also reduce the claim amount. Similarly, a higher IDV will increase your coverage and premiums. 

IDV and resale value may sound similar, but they serve different purposes in car ownership and insurance. Understanding the difference helps you choose the right insurance coverage and set realistic expectations when selling your vehicle. 

The basic formula to calculate the IDV of your vehicle is in the following:

Insured Declared Value = (Manufacturer’s listed price – Depreciation) + (Cost of accessories – Depreciation on accessories)

For new cars with extra accessories, this formula calculates the IDV by including those parts. If your vehicle has no additional accessories, the calculation may be much easier. 

Several online IDV calculators are available nowadays, providing free results without requiring personal information. Using them, you can determine your car’s IDV and ensure accurate insurance coverage by providing the following information:

• Car manufacturer or brand name

• Car model

• Car variant 

• Manufacturing year

• Owner serial number

Some factors determine the market value and the maximum claim amount under your insurance policy. The IDV of a vehicle depends on the following factors:

• Age of the Vehicle

As your car ages, its depreciation increases, which in turn lowers the IDV. Older vehicles have a lower IDV compared to newer ones because the value gradually decreases with age.

• Model and Variant

A vehicle’s model and variant determine its market value. Different cars and bikes have different prices. Insurers use it to calculate the vehicle’s market value and then deduct applicable depreciation to arrive at the IDV.

• Accessories

If you add accessories that are not factory-fitted, insurers include their value in the IDV calculation. Informing your insurer about added accessories increases the vehicle’s IDV.

• Insurer Policies

Insurers may offer different IDV values based on their policies. Comparing plans will help you find the best coverage.

Many car owners misunderstand Insured Declared Value, leading to higher premiums or inadequate coverage. Clearing these common myths helps you set the right IDV and avoid issues during claims.

• Many believe IDV is the resale value of the car, but it actually represents the maximum amount the insurer will pay in case of total loss or theft.

• It is often assumed that a higher IDV guarantees a higher payout during claims, whereas insurers consider the vehicle’s market value at the time of claim.

• Some think IDV applies to third-party insurance policies, even though it is relevant only for comprehensive or own-damage covers.

• There is a misconception that IDV can be changed at any time during the policy period, but in reality, it can only be revised at purchase or renewal.

• Many believe older cars do not require an accurate IDV, but an incorrect IDV can lead to underinsurance when making claims.

You can receive the full sum insured in two situations:

• Vehicle Theft: If someone steals your vehicle, the insurer pays the full claim after completing police documentation and verifying the case

• High Single Claim: If a single claim exceeds 75% of the IDV, the insurer considers it a total loss and pays the full amount

In both cases, you must pay the total deductible if it applies. 

Choosing the right IDV requires balancing adequate coverage with reasonable premiums. Getting insurance with the correct IDV will ensure you receive proper compensation without overpaying. Here are some guidelines:

• Don’t go for Undervaluation: Setting a low IDV will reduce your premium, but it can lead to insufficient compensation if someone steals your vehicle or the damage is beyond repair. 

• Avoid Overvaluation: A high IDV will increase your premium unnecessarily and will offer little additional benefit during a claim. 

• Use an IDV Calculator: Make your financial strategy more accurate with the help of a calculator. Use different combinations and select the right one mindfully.

Optimising your car’s IDV helps balance premium costs and claim payouts. Choosing the right insurer also ensures smoother claims and better long-term coverage. Keep the following guidelines in mind:

• Select an IDV close to your car’s current market value to avoid overpaying or underinsuring.

• Avoid setting an extremely low IDV, as it reduces claim payouts in the event of total loss or theft.

• Compare premiums across insurers for the same IDV to identify genuine cost differences.

• Check the insurer’s claim settlement ratio to assess reliability and efficiency in settling claims.

• Choose insurers offering a wide network of cashless garages for hassle-free repairs.

• Review the claim process to ensure it is simple, transparent, and well supported by customer service and digital channels. 

• Evaluate the quality of customer support, especially for emergency assistance.

• Read verified customer reviews to understand real claim experiences and service standards.

Carefully reviewing the IDV and buying or renewing your vehicle insurance will help you get the best value for your premium. Do not reduce the IDV to save on premiums, as it directly affects the compensation you receive in case of theft or total loss.

For the best approach, calculate the optimal IDV based on the factors and then choose insurance policies that offer coverage closest to this value.

Read More: Term Insurance vs. Life Insurance: Which Plan Protects Your Family Best?

Can I change my car’s IDV mid-policy?

Insurers usually don’t permit changing the IDV value after purchasing the insurance or during the mid-term. You can do it during the policy renewal. However, you can contact your insurer to request a mid-term IDV change if they allow it. 

What IDV should I choose for my bike?

Choose one that is closer to your bike’s market value. It will ensure you have proper coverage without overpaying premiums. It will also provide fair compensation in case of theft or total loss.

Is IDV the same as resale value?

No, IDV reflects your car’s current market value, giving an idea of its real worth. On the other hand, factors like condition, maintenance, market demand, and mileage determine its selling price.

Does IDV affect No Claim Bonus (NCB)?

Both IDV and NCB affect the overall value of your insurance policy, but they are individual factors that influence in different ways. They do not influence each other. 

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