The Ultimate Guide to Insured Declared Value in Car Insurance

There is a common notion that car insurance is a complicated affair — not only for first-time buyers but also for experienced ones. The jargon that is used in the policy document can often make it difficult for a layman to comprehend. To understand a policy thoroughly, one must try breaking down the meaning of these terms and then assess its impact on the policy’s coverage. Among the several terminologies, the insured declared value or IDV is a critical one affecting the policy’s coverage significantly. Here’s all you need to know about IDV in car insurance and how it is calculated.

What is the Insured Declared Value in Car Insurance?

Insured Declared Value or IDV is the maximum amount that the insurance company pays to the policyholder. Events like accidents where damage is beyond repair, natural or man-made calamities, or even theft give rise to situations of total loss (TL) or constructive total loss (CTL). In these situations, the insurance company pays the IDV to the policyholder. Often, IDV is misconstrued to be the resale value of your car. However, it is the approximate value of your vehicle considering its age. In simple terms, it is the value of your car in its existing condition. This IDV is a crucial factor in determining car insurance prices, as it is the maximum risk that your insurance company underwrites. *

How to Calculate the IDV of Your Car?

Calculating the IDV is a fairly complex process, but as a policyholder, you need not worry about it. The insurance company calculates this amount for you, or you can make use of a car insurance calculator. As per the 8^th General Regulation of the Indian Motor Tariff (GR. 8), the manufacturer's listed selling price for the model and make of your car are adjusted for depreciation to arrive at the IDV. Further, any accessories fitted that are otherwise excluded from the above calculation are also considered after adjusting for depreciation. * It can be mathematically expressed as follows: Insured declared value (IDV) = (The listing price of the manufacturer – Depreciation) + (Accessories fitted – Depreciation on such accessories) The registration costs and the state taxes are not included when calculating the IDV of your car. The GR. 8 of the Indian Motor Tariff has prescribed standardized rates for determining depreciation based on the age of the vehicle. *

Age of the Vehicle	Depreciation for Determining IDV
Not more than 6 months	5%
Greater than 6 months but not more than 1 year	15%
Greater than 1 year but not more than 2 years	20%
Greater than 2 years but not more than 3 years	30%
Greater than 3 years but not more than 4 years	40%
Greater than 4 years but not more than 5 years	50%

*Standard T&C Apply The IDV for vehicles older than five years are to be determined mutually between the policyholder and the insurance company.

What are Things to Remember When Setting the IDV of Your Car?

1. Do not understate the IDV. It is a common mistake that many policyholders make to save some premiums. However, it also leads to the lowering of the maximum compensation offered by the insurance company.
2. Do not overstate the IDV. Like understating the IDV can lead to a financial loss, overstating can increase the overall policy premium. The insurance company will compensate for the losses based only on the type of loss and not the entire amount of IDV.

  *Standard T&C Apply Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read the sales brochure/policy wording carefully before concluding a sale.