If you own a car and already have insurance, you may have seen a term called IDV in your policy document. Still, most car owners don’t really understand what is IDV in car insurance and why it plays such an important role during claim settlement.
In simple words, IDV decides how much money you will actually receive if your car is stolen or declared a total loss. A wrong IDV can mean a cheaper premium today but a heavy financial loss tomorrow.
In this guide, you’ll clearly understand what IDV is, how it is calculated, how it affects premium and claims, and how you should choose the right IDV in 2025.
What is IDV in Car Insurance?
IDV (Insured Declared Value) is the maximum amount your insurance company will pay if your car is:
- Stolen
- Damaged beyond repair (total loss)
You can think of IDV as your car’s current market value after depreciation, not the price you paid when you bought the car.
In one line: IDV is the present value of your car decided at the time of buying or renewing your insurance policy.
Why is IDV Important in Car Insurance?
IDV is not just a technical term. It directly impacts your financial safety.
IDV affects the following:
- Total loss claim amount
- Theft settlement value
- Insurance premium
- Overall coverage strength
For example, if your car’s IDV is ₹6,00,000 and the car is stolen, the insurance company can pay you up to ₹6,00,000 (after deductions).
This is why understanding what is IDV in car insurance is extremely important before buying or renewing a policy.
How is IDV Calculated in Car Insurance?
IDV is calculated using a standard formula approved by IRDAI.
IDV Formula
IDV = Ex-showroom price – Depreciation – Wear & Tear
Factors that affect IDV calculation:
- Age of the car
- Manufacturer and model
- Fuel type
- Registration city
- Declared accessories
IDV Depreciation Chart (As per IRDAI Guidelines)
| Car Age | Depreciation | IDV Percentage |
|---|---|---|
| Less than 6 months | 5% | 95% |
| 6 months – 1 year | 15% | 85% |
| 1 – 2 years | 20% | 80% |
| 2 – 3 years | 30% | 70% |
| 3 – 4 years | 40% | 60% |
| 4 – 5 years | 50% | 50% |
| Above 5 years | Mutual agreement | Negotiable |
How IDV Affects Your Car Insurance Premium
There is a direct relationship between IDV and premium.
- Higher IDV → Higher premium
- Lower IDV → Lower premium
Many people choose a lower IDV to save premium, but this can result in a lower claim amount later.
What Happens If You Choose Very Low IDV?
- Lower claim payout
- Financial loss in total damage
- Insufficient theft settlement
Saving a few thousand rupees in premium can cost you lakhs during a claim.
What Happens If You Choose Very High IDV?
- Unnecessarily high premium
- Claim limited to actual market value
- Possible dispute during settlement
Insurance companies never pay more than the actual market value, even if IDV is very high.
How to Choose the Right IDV for Your Car?
- Check your car’s ex-showroom price
- Apply correct depreciation
- Compare IDV across insurers
- Choose a realistic, mid-range IDV
The best IDV is one that closely matches your car’s current market value.
IDV in New Car vs Old Car Insurance
New car: High IDV, low depreciation, higher premium.
Old car: Lower IDV, higher depreciation, careful selection required.
IDV and Zero Depreciation Add-on
IDV is used for total loss or theft claims, while zero depreciation add-on improves repair claims.
Read more here:
Zero Depreciation Car Insurance Guide
Car Theft Claim Example Based on IDV
If your car has an IDV of ₹5,50,000 and gets stolen, the insurance company will pay up to ₹5,50,000 after deductibles.
This makes IDV the most important number in your policy.
Video: IDV Explained in Simple Language
Video: How IDV Impacts Claim Settlement
Frequently Asked Questions
What is IDV in car insurance in simple terms?
IDV is the maximum amount your insurer will pay if your car is stolen or totally damaged.
Does IDV reduce every year?
Yes, IDV decreases every year due to depreciation.
Can I change IDV at renewal?
Yes, within the allowed range provided by the insurer.
Conclusion
Now that you clearly understand what is IDV in car insurance, you should never ignore it while buying or renewing a policy.
A correct IDV ensures proper financial protection, fair claim settlement, and peace of mind. Always choose a realistic IDV — not the cheapest, not the highest — but the right one.