With the increasing population and speedy growth of the country, Car has not merely remained a symbol of status but a need of every common man these days. Now when the number of vehicles on the road has increased, more are the chances of road accidents. These accidents can cause a great amount of damage to you, your car and others. So it is essential to buy a Comprehensive Insurance Plan to deal with such kind of drastic situation. So while purchasing any Insurance plan the first thing the customer should give attention is the IDV.

IDV(Insured Declared Value) is basically the value of the car in the market after it has undergone any kind of loss like theft or partial or complete loss of the vehicle. This value is set by the insurer of the policy provider. The insurer derives its value by subtracting the depreciation from the Selling price of the vehicle. This Depreciation is directly proportional to the age of the vehicle. The insurer sets the percentage of Depreciation for adjusting IDV based on the age of the vehicle. If the car is 5 years old, in that case, the IDV is decided on the basis of mutual consensus between the insurer and the insured.

IDV Formula

Insured Depreciation Value = (Selling Price of Car- Depreciation Value) + (Cost of the accessories – Depreciation value of these accessories)

How Car IDV Calculation works

IDV is always calculated on the current selling price of the car brand and model, not on the price at which you have originally bought it not including the registration charges. So taking an example of Honda Amaze car which could have come at a cost price of  ₹ 8,50,000 Approx when you bought it 3 years back. However, if Honda has increased the price of Amaze to ₹ 8,80,000 today, then IDV will be calculated by using the depreciation value (as per table) on ₹ 5,80,000 and not ₹ 8,50,000.

IDV – Year-wise Depreciation Table as per Indian Motor Tariff

Age of the VehicleDepreciation Rate for Calculating IDV
Brand New Vehicle (just before purchase)5%*
up to 6 months5%
6 months – 1 year15%
1 year – 2 years20%
2 years – 3 years30%
3 years – 4 years40%
4 years – 5 years50%
more than 5 years (model is obsolete)decided mutually between owner and insurer

Explaining the above car depreciation rate with example :-

Taking Example of Honda Amaze ₹ 8,50,000

  • Upto 6 Months the Depreciation Rate is 5% so if the car was bought for 8,50,000 then the price will be 95% of ₹ 8,50,000 which will be ₹ 8,07,500
  • Now if the price of the same car model is increased to ₹ 8,90,000 and car is between 6 months – 1 Year then IDV will be calculated on ₹ 8,90,000 not on ₹ 8,50,000. So now IDV will be 85% of ₹ 8,90,000 which will be ₹ 7,56,500
  • 1 year – 2 years Depreciation Rate is 20% of ₹ 8,90,000 = ₹ 712000
  • 2 year – 3 years Depreciation Rate is 30% of ₹ 8,90,000 = ₹ 623000
  • 3 year – 4 years Depreciation Rate is 40% of ₹ 8,90,000 = ₹ 534000
  • 4 year – 5 years Depreciation Rate is 50% of ₹ 8,90,000 = ₹ 445000

IDV and Car Insurance Premium

Do check IDV while renewing your car insurance. Its because IDV has direct relationship with car insurance premium. Higher the IDV, higher is the premium to be paid.

Let understand with the help of an example. Assuming that your 3-year old car has an IDV as calculated by the depreciation table, of  ₹ 5,34,000 ans also assuming that the manufacturer gives you a range of 5% to increase or reduce the IDV, i.e. increase to as high as 5,60,700 or reduce it to as low as  ₹ 5,07,300.

Impact on Claim after Increasing or Reducing IDV

In case of total loss of car or the car is stolen in this case it is considered as a ‘complete loss’ of the vehicle i.e the vehicle is no longer capable to run on the road. So in such situation the insurance company from where you have taken the insurance will pay you the Sum Insured, i.e. the IDV of the vehicle which is calculated by the formula:
Insured Depreciation Value = (Selling Price of Car- Depreciation Value) + (Cost of the accessories – Depreciation value of these accessories)

After Increasing the Insured Declared Value

In the example above, if you had increased it to, say,  ₹ 5,60,700 , it does NOT mean that the insurer will pay you that money. So you may not receive more than  ₹ 5,34,000 for the loss. Therefore, it is advised not to go for a higher Insured Declared Value hoping for the claim amount to also increase.

After Reducing the Insured Declared Value

Planning to lower IDV just to save some amount in premium. STOP RIGHT THERE! For just a few hundred rupees extra as premium why would you want to lose out the value of your car.
if you were to reduce the Insured Declared Value to ₹ 5,07,300 , it could mean saving a few hundred rupees. But in case of total loss of your car, only ₹ 5,07,300 will be paid by the insurance company. Not a good deal at all.