Insured Declared Value (IDV) is the maximum sum assured for your vehicle under a comprehensive motor insurance policy. It represents the manufacturer's listed selling price minus depreciation based on the age of the vehicle. Calculating your IDV correctly is essential, as it determines both your own-damage premium and the payout you receive if your car is stolen or totaled.
The Depreciation Schedule
IDV is calculated using a standard depreciation scale set by the IRDAI. For example, a brand-new car has a 5% depreciation on its listed price. For a car aged between 1 and 2 years, the depreciation is 20%; for a car between 4 and 5 years, the depreciation reaches 50%. For vehicles older than 5 years, the IDV is mutually agreed upon between the insurer and the policyholder based on a valuation certificate.
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The Danger of Artificially Lowering IDV
To save money on their premium, many car owners manually lower the IDV of their vehicle during online renewals. While this does reduce the own-damage premium, it leaves you severely under-compensated in the event of a total loss (such as a catastrophic accident or vehicle theft). If your car is stolen and your IDV was set 30% below market value, you will lose lakhs of rupees to save a minor premium amount.
- Always set your IDV as close to the manufacturer-depreciated value as possible.
- Never artificially lower your IDV to save on premium, as it reduces your maximum sum assured during a total loss.
- Consider a 'Return to Invoice' add-on for cars less than 3 years old to secure the full invoice value including tax during theft.
- Verify that accessories (like CNG kits or high-end sound systems) are declared separately to adjust the IDV.
