Key Takeaways:
When you buy or renew vehicle insurance, a number in your policy determines, often unnoticeably, how much protection you can actually have. It determines both the premium you pay and the payout you receive, yet most people hardly notice it.
So, what is IDV in bike insurance, how does it differ from IDV in car insurance and why does it matter? Many policyholders ignore this number until a claim arises, but by then it’s often too late. To secure the full value of your coverage, it's essential to understand how IDV works.
IDV stands for Insured Declared Value. It represents the maximum amount your insurer will pay if your vehicle gets damaged or stolen. It reflects your car or bike’s current market value and adjusts annually for depreciation.
Knowing what is IDV in car insurance depends on the following factors:
For new cars, the IDV closely matches the ex-showroom price. As your car ages, insurers apply standard depreciation rates each year following guidelines set by the IRDAI (Insurance Regulatory and Development Authority of India).
For example, consider a car you bought for ₹10 lakh, which is now one year old. According to IRDAI rules, insurers will apply a 15% depreciation for vehicles between 6 months and 1 year old. This affects the IDV as follows:
This means that in case of theft or total loss, your insurer will pay a maximum of ₹8.5 lakh, provided you meet all their terms and conditions.
Selecting the correct IDV will help you balance insurance costs with financial protection, as it can affect both your claims and premiums in the following ways:
The basic formula to calculate the IDV of your vehicle is in the following:
Insured Declared Value = (Manufacturer’s listed price – Depreciation) + (Cost of accessories – Depreciation on accessories)
For new cars with extra accessories, this formula calculates the IDV by including those parts. If your vehicle has no additional accessories, the calculation may be much easier.
Several online IDV calculators are available nowadays, providing free results without requiring personal information. Using them, you can determine your car’s IDV and ensure accurate insurance coverage by providing the following information:
Some factors determine the market value and the maximum claim amount under your insurance policy. The IDV of a vehicle depends on the following factors:
As your car ages, its depreciation increases, which in turn lowers the IDV. Older vehicles have a lower IDV compared to newer ones because the value gradually decreases with age.
A vehicle’s model and variant determine its market value. Different cars and bikes have different prices. Insurers use it to calculate the vehicle’s market value and then deduct applicable depreciation to arrive at the IDV.
If you add accessories that are not factory-fitted, insurers include their value in the IDV calculation. Informing your insurer about added accessories increases the vehicle’s IDV.
Insurers may offer different IDV values based on their policies. Comparing plans will help you find the best coverage.
You can receive the full sum insured in two situations:
In both cases, you must pay the total deductible if it applies.
Choosing the right IDV requires balancing adequate coverage with reasonable premiums. Getting insurance with the correct IDV will ensure you receive proper compensation without overpaying. Here are some guidelines:
Carefully reviewing the IDV and buying or renewing your vehicle insurance will help you get the best value for your premium. Do not reduce the IDV to save on premiums, as it directly affects the compensation you receive in case of theft or total loss.
For the best approach, calculate the optimal IDV based on the factors and then choose insurance policies that offer coverage closest to this value.
Can I change my car’s IDV mid-policy?
Insurers usually don’t permit changing the IDV value after purchasing the insurance or during the mid-term. You can do it during the policy renewal. However, you can contact your insurer to request a mid-term IDV change if they allow it.
What IDV should I choose for my bike?
Choose one that is closer to your bike’s market value. It will ensure you have proper coverage without overpaying premiums. It will also provide fair compensation in case of theft or total loss.
Is IDV the same as resale value?
No, IDV reflects your car’s current market value, giving an idea of its real worth. On the other hand, factors like condition, maintenance, market demand, and mileage determine its selling price.
Does IDV affect No Claim Bonus (NCB)?
Both IDV and NCB affect the overall value of your insurance policy, but they are individual factors that influence in different ways. They do not influence each other.
