When you renew your car insurance, one of the most important terms you will come across is IDV in car insurance or Insured Declared Value. It is the amount your car is worth in the insurance world and plays a crucial role in determining both your premium and claim amount.
In other words, IDV is your car’s market value. If your vehicle gets stolen or suffers complete loss, your insurer will pay you this amount. That is why understanding how IDV is calculated and keeping it accurate is crucial when renewing your policy.
What is IDV in Car Insurance?
In simple terms, IDV is the maximum sum your insurer will pay you if your car is stolen or is damaged beyond repair. For new car insurance, IDV is generally close to the car’s ex-showroom price (excluding registration and road tax). As your car gets older, this value goes down due to depreciation.
For example, if you buy a new car for ₹10 lakh, the IDV in the first year might be around ₹9 lakh after accounting for a small depreciation. Each passing year, this value will continue to reduce, depending on your vehicle’s age and condition.
Why IDV Matters During Renewal?
Your IDV affects two major aspects of your policy: the premium you pay and the claim amount you receive.
A higher IDV usually means better coverage, but it also increases your premium. On the other hand, a lower IDV reduces your premium but could leave you short-changed during a claim. For example, if you set your IDV too low to save money, you will receive less compensation if your car is stolen or completely damaged.
That is why it is important to keep your IDV realistic. It should reflect the fair market value of your car, not the inflated value or undervalued figure.
How to Calculate IDV?
The IDV is calculated using a simple formula:
IDV = Manufacturer’s Listed Price – Depreciation.
Here is the general depreciation schedule used by most insurers:
- Up to 6 months: 5%
- 6 months to 1 year: 15%
- 1 to 2 years: 20%
- 2 to 3 years: 30%
- 3 to 4 years: 40%
- 4 to 5 years: 50%
For example, if your car’s ex-showroom price is ₹8 lakh and it is two years old, depreciation of 20% applies to its original value. Meaning your IDV would be ₹6.4 lakh. This is the amount your insurer would pay in case of total loss or theft.
Can You Adjust Your IDV?
Yes, insurers usually allow permissible margins to adjust your IDV, which can vary from one insurer to another. This gives you the flexibility to tweak the value slightly higher or lower, depending on your comfort. Some insurers even provide calculators to estimate the value of IDV in car insurance and set a suitable value.
However, undervaluing your car to reduce the premium can backfire during a claim. Similarly, setting the IDV too high can make your premium unnecessarily expensive. The best approach is to stay close to the car’s actual market value.
Conclusion
The IDV in car insurance might seem like just another number on your policy document, but it defines the real worth of your car in insurance terms. Setting it correctly helps you balance premium costs and claim benefits without compromise.
When buying a new car insurance policy or renewing your policy, take a few minutes to check your IDV and ensure it reflects your car’s true market value. With TATA AIG’s online car insurance renewal process, you can easily review, adjust and update your IDV to stay accurately covered.
