How Does Insured Declared Value (IDV) Affect Your Car Insurance Premium?

The recent rise in the number of road accidents has increased the need to have a car insurance policy. Without one, you might have to face financial burden in such cases. Hence, it is also important to know the factors on which your car insurance premium will be calculated. The Insured Declared Value (IDV) of your car plays a very important role in deciding the premium of your car insurance. If your vehicle gets stolen or gets totally damaged, you get the amount equivalent to your car’s sum insured, i.e. the IDV of your car insurance policy.

Keep reading to understand more about IDV in car insurance:

The fixed sum insured of the car during the beginning of every policy period is termed as insured declared value (IDV). This value is decided based on the selling price listed by the manufacturer. It is adjusted for depreciation according to the schedule given by the insurance company.

Depreciation means the drop in the value of an asset over time as a result of wear and tear due to continuous use. The percentage of depreciation increases every year and is inversely proportional to the age of your vehicle. This value is fixed for a term of five years and is carried forward depending on the mutual understanding between you and your insurer.

In case your vehicle is stolen or gets totally damaged, you are reimbursed as per the IDV of your vehicle. If the accident has caused partial loss, you receive a coverage for replacement or repairs of the damaged car parts. However, the reimbursement for certain parts is calculated after considering depreciation.

The following formula is used to calculate the IDV of a car:

IDV= (Listed selling price – depreciation) + (Accessories not included in the given selling price – depreciation) excluding insurance costs and registration

Role of IDV as per the type of car insurance you buy

The IDV varies depending on the type of car insurance policy you purchase out of the two types available. You get coverage against legal liabilities that arise out of injuries, damages, or even death caused to a third-party’s person or property under third party car insurance. However, any damage caused to your vehicle will not receive coverage under this plan. The IRDA, India’s insurance regulator, fixes the premium amount for the third-party car insurance. It differs for every vehicle as it depends on the make and model of your automobile. Therefore, under third-party insurance policy, the concept of IDV won’t be considered.

On the other hand, a comprehensive car insurance policy will cover damages caused to your car along with third-party liability. Not only that, coverage is provided for any damage suffered as a result of man-made or natural calamities, i.e. earthquake, floods, etc. The premium for a comprehensive car insurance policy is calculated based on the IDV and other such factors. As the years pass by, the vehicle’s value will depreciate and the IDV will decrease as well, because the older your car, the higher will be the rate of depreciation.


Of the various add-on covers available, you can opt for the Zero Depreciation cover, which is also known as Nil Depreciation Cover, and save on depreciation deductions. With this cover, you will be protected from the cost of depreciation that you have to bear pay during claims. To reduce your premium amount, make use of the car insurance premium calculator and get quotes quickly within a few clicks. In case of any other car insurance-related query, you can contact your insurer by visiting their website.

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