When buying or renewing a car insurance policy, you might have come across the term IDV, or Insured Declared Value. It is more than a number. It represents your car’s current market worth and determines how much you will receive if your vehicle is stolen or completely damaged. Getting the IDV right is key to ensuring your car insurance coverage truly protects your investment.
Understanding the Concept of IDV
The IDV or Insured Declared Value is the maximum amount your insurer will pay if your car is declared a total loss. It is calculated based on the manufacturer’s selling price minus depreciation over time. The older your car, the lower its IDV, due to wear and tear and market depreciation.
In simple terms, IDV reflects what your car is worth today, not what you paid for it. When you purchase a new car insurance policy, your IDV will be close to the car’s showroom price. A years pass, insurers apply standard depreciation rates, usually 5% for the first six months, up to around 50% after five years.
This value not only influences your payout but also directly affects your premium. A higher IDV increases the premium but gives you better compensation, while a lower IDV reduces the premium but limits your claim amount. The goal is to find the right balance, accurate, fair and practical.
What is the Ideal IDV for Car Insurance?
While there is no one-size-fits-all formula for an ideal IDV car insurance, here are some factors that can help you to set the right IDV for your car.
Car Age and Depreciation
Every car loses value over time. Insurers follow a standard depreciation chart to calculate your vehicle’s worth. For new cars, depreciation is minimal. For older vehicles, the drop is more significant. Check your car’s current resale price to get a realistic picture.
Make, Model and Variant
Luxury or premium models hold value longer than entry-level ones. When setting your IDV, factor in the car’s brand reputation and variant features, as these influence resale value and repair costs.
Market Trends and Region
Used car prices are not the same everywhere. In some cities, demand for second-hand cars keeps values higher than average. Before you finalise your IDV, take a quick look at local listings or check what nearby dealers are quoting. It will give you a more realistic idea of what your car is actually worth right now.
Condition and Maintenance
A well-maintained car may justify a slightly higher IDV within your insurer’s permitted range. Regular servicing, fewer kilometres driven, and added safety features can strengthen your case.
Insurer’s Guidelines
Most insurers allow you to adjust your IDV within a small percentage range during renewal. Use this flexibility to ensure your IDV matches your car’s real market value rather than relying only on automated estimates.
Mistakes to Avoid While Choosing IDV
Many car owners reduce their IDV to save on premium costs. This is a move that can backfire during claims. If your car gets totalled, you will only receive compensation based on the lower declared value, even if your car was worth more.
Similarly, inflating your IDV doesn’t help either. It might look reassuring, but it only raises your premium, since insurers will never pay more than the actual market value. The key is moderation. Always choose an IDV grounded in reality, not guesswork.
Conclusion
Your IDV is at the heart of your car insurance policy. It defines how fair your protection truly is, whether it is for a new vehicle or one that has seen a few years on the road. By setting the right IDV, you ensure your coverage matches your car’s real worth and avoid surprises at claim time.
When you buy or renew your policy with insurers like TATA AIG, you can easily calculate and adjust your IDV online. It is a smart way to keep your new car insurance fair, transparent and perfectly aligned with your vehicle’s value.
Lynn Martelli is an editor at Readability. She received her MFA in Creative Writing from Antioch University and has worked as an editor for over 10 years. Lynn has edited a wide variety of books, including fiction, non-fiction, memoirs, and more. In her free time, Lynn enjoys reading, writing, and spending time with her family and friends.
