Insured Declared Value or IDV, as it is popularly known, is a simple term which is often perceived as complex. This perceived complexity is mostly due to the use of a formula, table, and the implications on a vehicle’s insurance premium. From knowing the layered IDV meaning to acknowledging its importance, the following sections are aimed at understanding everything about it.

Understanding Everything About Insured Declared Value (IDV) - Acko

What is IDV?

IDV in insurance means the vehicle’s current market value. Simply put, it is the Sum Insured. Both IDV and Sum Insured are self-explanatory terms. Insured Declared Value means the value declared by the insured person. Sum Insured means the sum or amount of money insured. What this means in case of vehicle insurance is that, IDV is the maximum amount of money the insurer will pay the insured person in case of Total Loss, Constructive Total Loss, and Theft.

IDV’s meaning is connected with insurance’s Principle of Indemnity. Here, indemnity relates to compensation for damage and theft. This principle states that insurance isn’t designed to help the insured person make a profit but to compensate for the loss. There shouldn’t be scope for monetary benefit when it comes to claims. Thus, IDV in insurance means the maximum value paid by the insurer, if the paid value increases the IDV, the insured person might make a profit from it, which is not the objective of insurance.

IDV and Claims

IDV is not associated with other claims, neither is it the vehicle’s resale value. Its scope is limited to the three situations mentioned below:

1 – Total Loss: The damaged vehicle is incapable of running on the road any more

2 – Constructive Total Loss: The cost of repairing the damages exceeds 75% of IDV

3 – Theft: The vehicle is stolen

How is IDV calculated?

IDV is calculated as per the following formula:

IDV = (Listing price stated by manufacturer – Depreciation) + (Additional accessories – Depreciation)

Depreciation table as per India Motor Tariff:

Age of the vehicle

% of Depreciation for calculating IDV

Not exceeding 6 months


Exceeding 6 months but not exceeding 1 year


Exceeding 1 year but not exceeding 2 years


Exceeding 2 years but not exceeding 3 years


Exceeding 3 years but not exceeding 4 years


Exceeding 4 years but not exceeding 5 years


Exceeding 5 years

Depends on mutual understanding between insured person and insurer

Therefore, IDV is a dynamic value. It changes as your vehicle’s age increases. Insurers compute the IDV based on the information provided to them by the insured person. Information pertaining to the vehicle’s make, model, cubic capacity, registration, etc. is taken into consideration and the IDV is calculated.

Is declaring a lower IDV helpful for the insured person?

A lower IDV in insurance means lower insurance premium. This will have an impact on the amount received during claim settlement as well. Because the insurance premium is low, the value received during claim settlement will also be low. This might be counterproductive in the long run and defies the purpose of insurance which is to safeguard your financial interest in case of a loss. Thus, it is suggested to go for a correct IDV and not opt for a lower or higher value. A higher value will increase your insurance premium and you will unnecessarily pay more.

Practical Aspect

For example, consider Mr. A’s car was priced at Rs. 5 lakhs. Its approximate IDV while purchasing the first insurance policy amounted to Rs. 4.75 lakhs. The insurance premium was charged accordingly. All went well for a year. While renewing the policy after a year, the IDV reduced to Rs. 4 lakhs and the vehicle was stolen. After raising a valid claim, Mr. A was paid Rs. 4 lakhs by the insurer to settle the claim.

Now that you have a clear idea about IDV, declare the correct value, keep renewing your car insurance policy on time, and stay insured.

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