Knowledge Centre

Concept of IDV in Car Insurance

Before you buy car insurance it is imperative you understand how its premium is calculated. Insured declared value is one of the most significant factors contributing towards the calculation of your car insurance premium. In case your car is stolen or is totally damaged, the insurance company will pay you an amount equivalent to the sum insured of your car. This sum insured is known as the insured declared value of your car insurance policy. Your car insurance premium is calculated on the basis of the IDV. Read this blog to get a clear insight of the concept of IDV in car insurance.

First, let’s understand what is insured declared value?

To put it simply, insured declared value is the sum insured of the car that is fixed at the time of commencement of each policy period. The value is fixed on the basis of the manufacturer’s listed selling price and is adjusted for depreciation as per the below given schedule by the insurance company.

Depreciation schedule followed for fixing the insured declared value of a car

Age of vehicle

% of Depreciation

Not exceeding 6 months


Exceeding 6 months but not exceeding 1 year


Exceeding 1 year but not exceeding 2 year


Exceeding 2 year but not exceeding 3 year


Exceeding 3 year but not exceeding 4 year


Exceeding 4 year but not exceeding 5 year


The insured declared value for five years is fixed as per the above schedule and then is decided upon the mutual understanding between the policyholder and the insurance company. Insured declared value is paid to the policyholder in case of the total loss of the vehicle or its theft. In case of a partial loss, the coverage is provided for repair and replacement of the vehicle parts, negating the value of the depreciated parts as per the above-given schedule.

The insured declared value of a car is calculated as per the below formula:

IDV= (Manufacturer’s listed selling price- depreciation) + (Accessories that are not included in listed selling price-depreciation) and excludes registration and insurance costs.

Role of IDV as per the type of car insurance you buy

There are two types of car insurance policies you can buy. Herein the role of insured declared value varies depending on the type of car insurance policy you purchase.

Third party car insurance provides coverage against all the legal liabilities arising out of damages, injury or death caused to third person or property. This type of policy does not provide coverage for damages caused to your vehicle. The premium for the third party is fixed by the IRDAI and varies for each vehicle make and model type. Hence, the concept of insured declared value does not come into the picture under a third party insurance policy.

On the other hand, a comprehensive car insurance policy provides coverage for own damage as well as the third party. It provides coverage for damages caused due to man-made and natural calamities including theft, floods, earthquake and others. The premium calculation for a comprehensive car insurance policy is done on the basis of insured declared value and other factors. Over the years, as the vehicle depreciates, the insured declared value too decreases. Older the car, higher is the depreciation rate.

Other factors that have an impact on the car insurance premium

  • Vehicle type-diesel/petrol/CNG

  • Vehicle registration location

  • The cubic capacity of the vehicle

  • Vehicles make and model details

  • Vehicle registration details-private/commercial


Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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