The Role of IDV (Insured Declared Value) in Your Motor Insurance Policy

 If you have ever purchased or renewed a motor insurance policy, you have probably come across the term IDV—short for Insured Declared Value. At first glance, it may look like just another technical term in your policy document. But the truth is, IDV plays a crucial role in determining your premium and the amount you will receive in case your vehicle is declared a total loss.

In this blog, we will break down what IDV really means, how it is calculated, why it matters, and how you can make smart decisions that balance cost and coverage effectively.

What Is IDV?

IDV, or Insured Declared Value, is the maximum sum insured that the insurance company agrees to pay you if your vehicle is stolen or suffers total loss or complete damage beyond repair.

Simply put, it is the current market value of your vehicle after accounting for depreciation.

Let us say you bought a car worth 10 lakh rupees two years ago. Its current market value may have dropped due to age and wear and tear. That updated value—based on your car's make, model, and age—is what your insurer considers the IDV.

This number becomes the basis for two things:

  1. The premium you pay for your motor insurance

  2. The maximum claim amount you will get for a total loss or theft


How Is IDV Calculated?

Insurers typically calculate IDV using a standard depreciation schedule provided by the Insurance Regulatory and Development Authority of India (IRDAI). This schedule considers the age of the vehicle and deducts a fixed percentage from the original ex-showroom price.

Here is a rough breakdown:

  • Up to 6 months old: 5 percent depreciation

  • 6 months to 1 year: 15 percent depreciation

  • 1 to 2 years: 20 percent depreciation

  • 2 to 3 years: 30 percent depreciation

  • 3 to 4 years: 40 percent depreciation

  • 4 to 5 years: 50 percent depreciation

For vehicles older than five years, IDV is mutually agreed upon between the insurer and the vehicle owner.


Why Is IDV So Important?

Many policyholders simply accept the IDV offered by the insurer without thinking twice. But understanding its impact can help you avoid financial shocks later.

Here is why it matters:

  • Lower IDV means lower premium: Yes, your premium will be cheaper if the IDV is low. But it also means you will receive less in case of a total loss claim.

  • Higher IDV means better coverage: You may pay a slightly higher premium, but you get a better payout if something goes seriously wrong.

Finding the right balance between affordable cost and adequate coverage is the key. That is why many vehicle owners now compare insurers not just on premium prices but on how they calculate and offer IDV.

Choosing the best motor insurance often means choosing a provider who offers a fair IDV calculation and gives you flexibility to customize it.


Can You Change the IDV?

Yes, in most cases, insurers allow a small range of adjustment—usually up to 15 percent—above or below the standard IDV. This gives you some control over your premium and coverage.

But keep in mind:

  • Setting IDV too low just to save on premium may lead to major disappointment during a claim

  • Setting IDV too high may result in unnecessary premium hikes with no practical benefit, as your insurer will only pay market value at the time of loss


Common Mistakes People Make with IDV

  1. Assuming IDV equals resale value
     The resale value of your car in the second-hand market may be higher or lower than the IDV, depending on demand. But insurers stick to the market value framework, not resale potential.

  2. Not checking the IDV during renewal
     Some people renew their policies without reviewing the IDV, leading to gradual undervaluation over time.

  3. Accepting default values without questioning
     Many insurers set IDV on autopilot. It is always worth reviewing and adjusting it based on your vehicle’s actual condition and usage.


How to Choose the Right IDV

  • If your car is brand new or relatively new, choose an IDV closer to the ex-showroom price

  • If your car is a few years old and still in good condition, you can choose a slightly higher IDV for added safety

  • If you are planning to sell the car soon or drive it rarely, you may opt for a moderate IDV and a lower premium

  • Talk to your insurer and understand the flexibility available with your IDV

Ultimately, a well-chosen IDV protects you better when it matters the most.


Why Universal Sompo Is a Smarter Choice

At Universal Sompo, we offer flexible IDV options and complete transparency when it comes to premium calculation. We believe our customers should know exactly what they are paying for and what they will get in return.

If you are searching for the best motor insurance, look for a provider that helps you tailor your IDV, explains the policy in simple terms, and supports you during claims with clarity and fairness.


Final Thoughts

IDV is not just a number on your policy—it is your vehicle’s financial worth in the eyes of your insurer. Understanding how it works and how it affects your coverage can help you make better decisions and avoid surprises.

Whether you are buying a new policy or renewing an existing one, take a moment to review your IDV. It might be the difference between feeling secure and feeling short changed when you need your insurance the most.

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