5 Facts About Your Car’s Insured Declared Value | Bharti AXA

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5 Facts About Your Car’s Insured Declared Value

5 Facts About Your Car’s Insured Declared Value

While purchasing a car insurance policy is necessary and also quite simple and straightforward (you can buy car insurance online in a matter of minutes) there are many different terms that you will come across while buying car insurance that can be intimidating.

Insured declared value or IDV is a term that you will frequently come across in a car insurance policy. IDV is one of the most important concepts in car insurance that needs to be well understood. These 5 facts will serve as your guide to getting a complete understanding about your car’s IDV.   

Fact 1:

Insured Declared Value (IDV) = Sum Insured of your car insurance policy

Insured Declared Value or IDV is the maximum sum insured which you as the policyholder will receive from the insurance company as compensation in case you raise a claim. IDV is decided after considering the depreciation based on the age of your car and the car manufacturer’s present value. The IDV for your car has to be fixed when you buy car insurance. In short IDV is the approximate current market value of your car.

Fact 2:

Insured Declared Value impacts your car insurance premium

IDV has a direct bearing on the premium for your car insurance policy. If you overestimate the value of your car and declare a higher IDV to your insurer, it will push up your policy premium and you will be paying a higher premium amount.

The reverse is also true. By declaring a lower IDV you will save on the insurance premium and pay a lower premium but there is a catch here. Say in future you make a claim for accident damages. You will receive a lesser amount as reimbursement from your insurer because your IDV sum assured is low. So you will have to pay the difference in repair costs from your own pocket. The best thing to do for keeping your premium under control is to set the IDV for your vehicle accurately when you purchase car insurance.

Fact 3:

Depreciation affects the IDV calculation for new cars

Depreciation means the loss of value of a vehicle over time. This concept in car insurance particularly affects those who have bought a new car and are looking to get it protected with car insurance. This loss of value or depreciation of the car due to usage and normal wear and tear actually begins from the time that you drive your brand new car out of the showroom. Insurance companies will take into account the depreciation of the vehicle while calculating your car’s insured declared value or IDV.

The calculation for arriving at your car’s IDV looks something like this:

IDV = {[(Manufacturer’s listed selling price or Ex-showroom price) + (Sales Tax) + (Accessories that are not included in listed selling price – depreciation)] – (Depreciation + Registration costs + Insurance costs)}

You can minimise the effects of depreciation by taking a zero depreciation add-on cover in your comprehensive car insurance policy. It will mean paying a slightly higher premium but it saves you from paying depreciation on the cost of repair or replacement of parts such as fibre glass components, rubber, nylon / plastic parts, tyres and tubes, batteries and air bags and wooden parts, which can run up a high workshop bill.  When you buy comprehensive or standalone own-damage car insurance you get the choice to boost your coverage by purchasing add-on covers offered by the insurance company.

Fact 4:

The rates of depreciation for calculating IDV are standardised

When you purchase a new car insurance policy or at the time of renewing your car insurance, the IDV will be set by deducting the applicable depreciation value from your car’s current market price. The table below shows the standard rates of depreciation as stipulated by the Motor Tariff Act.

Age of the Car


0 to 6 months

95% of ex-showroom price

6 months to 1 year


1 year to 2 years


2 years to 3 years


3 years to 4 years


4 years to 5 years


More than 5 years

Flexible (open to negotiation)


Fact 5:

IDV for older cars is fixed mutually

You need to pay attention to the IDV each time you renew your car insurance policy. As you know, IDV affects the amount of premium you pay each year. You also know how depreciation impacts the calculation of IDV for new cars. Now suppose your car is more than 5 years old. How will the IDV be decided? Well for a 5-year old car or a discontinued car model, instead of depreciation the insurance company will assess the condition of your car. Three things will be taken into consideration – the manufacturer brand, model and availability of spare parts. The IDV will be arrived at based on a mutual agreement between the policyholder and insurance company.