IDV Insured Declared Value

Insured Declared Value, or IDV, is the maximum amount an insurance company will pay in case your vehicle is stolen or declared a total loss. IDV represents the current market value of your vehicle, adjusted for depreciation based on its age. It forms the basis for calculating your motor insurance premium.

What Is IDV in Motor Insurance?

IDV is the approximate selling price of your vehicle in the current market. It is determined by the manufacturer’s listed selling price minus depreciation for the vehicle’s age. When you renew your insurance, the IDV is recalculated to reflect the reduced market value of your ageing car.

**Purpose:** IDV sets the ceiling for your claim payout. In total loss or theft, the insurer pays the IDV amount (minus any deductibles or excess), not the original purchase price.

How IDV Is Calculated

IRDAI specifies the depreciation schedule for IDV calculation:

| Vehicle Age | Depreciation on IDV |
|————|———————|
| Less than 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% |

IDV = (Manufacturer’s listed selling price – depreciation) + accessories value

IDV and Premium Relationship

A higher IDV leads to a higher premium and a higher potential payout in total loss or theft. A lower IDV reduces the premium but also reduces your claim amount. At renewal, some policyholders reduce their IDV to lower premiums, which can leave them underinsured.

Under-Insurance and Over-Insurance

– **Over-insuring** (high IDV): You pay more premium but get more in a total loss claim
– **Under-insuring** (low IDV): You save on premium but receive less if the car is stolen or totalled

A good approach is to declare the actual current market value of the vehicle as the IDV.

Return to Invoice Add-On

For new cars, you can buy a “Return to Invoice” add-on, which guarantees that in case of total loss or theft, you receive the original invoice amount instead of the depreciated IDV. This is useful in the first few years when the gap between invoice price and IDV is significant.

Practical Example

Vikram bought a car for Rs 12 lakh two years ago. At renewal, its IDV is calculated as Rs 9.6 lakh (20% depreciation applied). His insurance pays a premium based on this IDV. When his car is stolen in year 3, the insurer pays the IDV at that time, approximately Rs 8.4 lakh. Without a return to invoice add-on, he absorbs the Rs 3.6 lakh difference from his own funds.

Key Takeaways

– IDV is the current market value of your vehicle used to determine the maximum claim payout
– It decreases each year as the vehicle depreciates
– Setting the IDV too low saves on premium but under-insures your vehicle
– For new cars, a Return to Invoice add-on ensures the original purchase price is paid in total loss
– Review and confirm the IDV accurately at each annual renewal to avoid surprises at claim time