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How to Derive IDV in Car Insurance

  • Writer: Square Insurance Brokers
    Square Insurance Brokers
  • Oct 16, 2025
  • 4 min read

Car insurance is more than just a legal requirement in India—it is a financial safeguard that protects your vehicle against accidents, theft, and natural calamities. One of the most crucial elements in determining your car insurance premium and claim settlement is the Insured Declared Value (IDV).

In this comprehensive guide, we will explain what IDV is, how to derive it, factors affecting it, and tips to ensure your car is adequately insured.


1. What Is IDV in Car Insurance?

IDV (Insured Declared Value) is the current market value of your vehicle as determined by the insurance company. It represents the maximum claim amount you can receive in case of total loss or theft of your car.

Key points about IDV:

  • IDV is directly proportional to the car’s age—newer cars have higher IDV.

  • It affects your premium; higher IDV means higher premiums.

  • IDV is reassessed every policy year, reflecting depreciation and market value changes.

Example:A 2-year-old car with a current market value of ₹6,00,000 may have an IDV of ₹4,20,000 after applying depreciation.


2. How to Derive IDV

Deriving IDV involves calculating the car’s current market value and applying depreciation. The general formula is:

IDV=Current Market Value of Car−Depreciation\text{IDV} = \text{Current Market Value of Car} - \text{Depreciation}IDV=Current Market Value of Car−Depreciation


A. Determine the Current Market Value

The current market value is the price at which the car can be sold today. This is based on:

  • Manufacturer’s listed price (ex-showroom price)

  • Model, variant, and fuel type

  • Age of the vehicle

  • Condition of the car


B. Apply Depreciation

Depreciation accounts for wear and tear and reduces the market value over time. Standard depreciation rates used by insurers:

Vehicle Age

Depreciation Rate

Up to 6 months

5%

6 months – 1 year

15%

1 – 2 years

20%

2 – 3 years

30%

3 – 4 years

40%

4 – 5 years

50%

Example:A 2-year-old car valued at ₹6,00,000:

IDV=6,00,000−(6,00,000×0.3)=₹4,20,000IDV = 6,00,000 - (6,00,000 \times 0.3) = ₹4,20,000IDV=6,00,000−(6,00,000×0.3)=₹4,20,000


3. Factors Affecting IDV

Several factors influence the IDV of a car:

  1. Age of the Vehicle: Older cars have lower IDV due to higher depreciation.

  2. Car Make and Model: Luxury or premium cars have a higher IDV than entry-level models.

  3. Condition of the Car: Well-maintained cars may have slightly higher IDV.

  4. Location: Urban areas with higher accident rates may influence the market value.

  5. Add-Ons & Accessories: Factory-installed accessories may be included in IDV; after-market accessories often require additional coverage.


4. Importance of Correct IDV

  • Correct Premium Calculation: IDV determines the own-damage premium portion of your insurance.

  • Accurate Claim Settlement: Under-insured vehicles result in lower claim payouts.

  • Avoid Overpaying: Overestimating IDV increases premiums unnecessarily.

  • Legal Compliance: Insurance policies with accurate IDV ensure transparency and reduce disputes.


5. Tips to Derive IDV Accurately

  1. Check Official Price Lists: Use manufacturer’s ex-showroom price and verified market data.

  2. Consider Depreciation Guidelines: Follow insurance company’s depreciation table.

  3. Include Factory-Fitted Accessories: Don’t forget add-ons like music systems, alloy wheels, or airbags.

  4. Avoid Overstatement: Overstating IDV increases premium but won’t increase claim amount.

  5. Use Online Calculators: Most insurers provide an IDV calculator for accurate estimation.


6. IDV and Motor Insurance Premium

IDV directly impacts motor insurance premiums:

  • Higher IDV: Higher own-damage premium.

  • Lower IDV: Lower premium but smaller claim amount in case of total loss.

Choosing the correct IDV is a balance between insurance cost and financial protection. Insurers may reduce IDV to lower premiums, but this can hurt in case of a claim.


7. IDV for New vs Old Cars

  • New Cars: IDV is usually close to ex-showroom price, as depreciation is minimal.

  • Older Cars: IDV decreases annually due to depreciation, lowering premium and claim settlement.

Example:

  • New car: IDV = ₹8,00,000

  • 3-year-old car: IDV = ₹4,80,000


8. Common Mistakes While Deriving IDV

  1. Ignoring Depreciation Tables: Leads to over- or underestimation.

  2. Excluding Accessories: Can reduce claim settlement during accidents.

  3. Relying on Resale Value Alone: Market resale value may not match insurance IDV.

  4. Delaying Renewal: IDV must be reassessed annually; delays affect premium and coverage.


9. How to Check IDV Online

Most insurance companies offer online tools to calculate IDV:

  1. Visit the insurer’s website.

  2. Enter car details: make, model, variant, fuel type, and manufacturing year.

  3. Review the calculated IDV.

  4. Compare quotes with multiple insurers to get the best premium.

This ensures transparency and avoids misunderstandings during claim settlement.


10. Final Thoughts

Deriving IDV is a critical step in car insurance, as it determines your premium, coverage, and claim settlement amount. Understanding IDV allows car owners to:

  • Pay the right premium

  • Ensure adequate financial protection

  • Avoid disputes during claims

  • Maximize the benefits of comprehensive car insurance

By using manufacturer data, depreciation tables, and online calculators, you can derive IDV accurately and make informed insurance decisions.


Key Takeaways:

  • IDV = Current Market Value – Depreciation

  • Determines premium and claim amount for own-damage coverage

  • Must include factory-installed accessories

  • Reassess annually for accurate coverage

  • Use online calculators for transparency


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Frequently Asked Questions

  1. What is IDV in car insurance?

    IDV (Insured Declared Value) is the current market value of your car and determines the maximum claim amount for theft or total loss.


  2. How is IDV calculated?

    IDV is calculated using the formula:

    IDV = Current Market Value – Depreciation, based on vehicle age and condition.


  3. Why is IDV important?

    IDV affects your premium, claim settlement, and financial protection. Accurate IDV ensures correct premium and fair claim payout.


  4. Can I include accessories in IDV?

    Yes, factory-fitted accessories are included in IDV, while aftermarket additions may require separate coverage.


  5. How often should IDV be updated?

    IDV should be reassessed every policy renewal, as depreciation changes the car’s value annually.

 

 
 
 

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