How to Calculate IDV in Motor Insurance | Meaning, Formula & Example (2025)

When it comes to buying or renewing a motor insurance policy, one of the most important terms you’ll come across is IDV – Insured Declared Value. Many vehicle owners ignore this aspect, but in reality, IDV plays a crucial role in deciding your premium amount as well as the claim amount in case of theft or total loss of your vehicle.

In this detailed guide, we’ll break down what IDV means, how it’s calculated, and why it matters — along with a simple example and formula to help you make informed decisions.

What is IDV in Motor Insurance?

IDV (Insured Declared Value) is the current market value of your vehicle. In simple terms, it is the maximum amount your insurer will pay in case your car or two-wheeler gets stolen or suffers a total loss due to an accident.

For example, if your car’s IDV is ₹7 lakh and it is stolen, then ₹7 lakh (minus any applicable deductibles or depreciation) is what the insurer will compensate.

Key Takeaway:

A higher IDV means a higher premium, but also better coverage. A lower IDV means lower premium, but less compensation in case of loss.

Why is IDV Important in Motor Insurance?

Understanding IDV is not just a technicality; it can directly impact your financial safety. Here’s why IDV matters:

• Determines Claim Amount – In case of total loss or theft, the IDV is the maximum amount you’ll get from your insurer.
• Impacts Premium – IDV directly affects the cost of your insurance policy.
• Represents Market Value – IDV reflects the depreciation of your vehicle over time.
• Ensures Fair Settlement – A correct IDV ensures fair compensation, neither over-insured nor under-insured.

How to Calculate IDV in Motor Insurance?

The calculation of IDV is based on the manufacturer’s listed price of the vehicle minus depreciation according to the vehicle’s age. Accessories that are not part of the original equipment can also be added separately.

IDV Formula:

IDV=Manufacturer’s Listed Price−Depreciation Value+Value of Accessories (if any)\text{IDV} = \text{Manufacturer’s Listed Price} - \text{Depreciation Value} + \text{Value of Accessories (if any)}IDV=Manufacturer’s Listed Price−Depreciation Value+Value of Accessories (if any)

Depreciation Schedule for IDV Calculation

The Insurance Regulatory and Development Authority of India (IRDAI) has defined standard depreciation rates to calculate IDV.

Vehicle Age

Depreciation %

Less than 6 months

5%

6 months – 1 year

15%

1 – 2 years

20%

2 – 3 years

30%

3 – 4 years

40%

4 – 5 years

50%

For vehicles older than 5 years, the IDV is mutually decided between the insurer and the insured based on the vehicle’s condition and market value.

Step-by-Step Example of IDV Calculation

Let’s understand IDV with a realistic example:

Suppose:

• Ex-showroom price of car: ₹10,00,000
• Age of vehicle: 2 years
• Depreciation rate: 30%
• Value of additional accessories: ₹25,000

Step 1: Calculate depreciation value

• 10,00,000×30%=₹3,00,000₹10,00,000 × 30\% = ₹3,00,000₹10,00,000×30%=₹3,00,000

Step 2: Subtract depreciation from manufacturer price

• 10,00,000−₹3,00,000=₹7,00,000₹10,00,000 - ₹3,00,000 = ₹7,00,000₹10,00,000−₹3,00,000=₹7,00,000

Step 3: Add accessory value (if any)

• 7,00,000+₹25,000=₹7,25,000₹7,00,000 + ₹25,000 = ₹7,25,000₹7,00,000+₹25,000=₹7,25,000

Final IDV = ₹7,25,000

This means, in case of theft or total loss, the insurer will compensate up to ₹7.25 lakh (subject to terms & deductibles).

Factors That Affect IDV Calculation

While depreciation is the primary factor, there are other important aspects that can influence the IDV of your vehicle:

1. Age of the Vehicle:

   Older vehicles have lower IDV because their market value decreases over time.

2. Make & Model:

   Premium cars and luxury vehicles have higher IDV compared to budget models.

3. Location:

   Urban cities often have a higher IDV due to market demand and repair costs.

4. Condition of Vehicle:

   For older vehicles (5+ years), IDV is decided based on current market conditions.

5. Add-on Accessories:

   Fitted accessories like alloy wheels, infotainment systems, or safety gadgets increase IDV.

IDV vs Sum Insured – Are They the Same?

A common confusion among policyholders is between IDV and Sum Insured.

• IDV = Market value of the vehicle (used for own damage cover)
• Sum Insured = Total coverage amount under the insurance policy (includes third-party and own damage cover)

Note: In motor insurance, IDV is applicable only for own damage claims.

Can You Choose Your Own IDV?

Yes, insurers generally allow a 10–15% variation in IDV while buying or renewing a policy.

However, choosing a very low IDV might reduce your premium but can lead to lower claim amount. On the other hand, selecting a very high IDV might unnecessarily increase your premium.

Pro Tip: Always keep your IDV close to the real market value of your car for fair compensation and reasonable premium.

Impact of IDV on Motor Insurance Premium

IDV directly affects the Own Damage (OD) component of your motor insurance premium.

• Higher IDV = Higher Premium
• Lower IDV = Lower Premium

For example:

• IDV ₹8 lakh → Premium ₹12,000
• IDV ₹6 lakh → Premium ₹9,000

But remember, a lower premium today can cost you more tomorrow in case of a major claim.

How to Check IDV of Your Car or Bike

You can easily check the IDV of your vehicle in multiple ways:

1. Policy Document: IDV is clearly mentioned in your existing motor insurance policy.
2. Insurance Company’s Website: Many insurers offer online premium calculators where IDV is auto-calculated.
3. Vehicle Valuation Tools: Various online platforms help estimate the current market value of your car or bike.
4. Authorized Dealers: Manufacturers and dealers can provide the depreciated value of your vehicle model.

Tips to Choose the Right IDV for Your Vehicle

Don’t undervalue your vehicle just to save on premium.

Don’t overestimate IDV to get higher claim — it only increases premium.

Always check your vehicle’s current resale value before renewal.

Compare IDV across different insurers for better deals.

For older vehicles, negotiate with the insurer to arrive at a fair IDV.

Common Mistakes People Make with IDV

Opting for very low IDV to save a few hundred rupees on premium.

Not reviewing IDV during policy renewal.

Confusing IDV with resale price or invoice value.

Not including accessories in IDV calculation.

These mistakes can result in lower claim settlement during unfortunate events.

Conclusion

IDV is one of the most crucial elements in your motor insurance policy. It not only determines the premium amount but also the claim payout in case of theft or total loss. Understanding how IDV works can help you make smart insurance decisions and avoid financial loss.

When renewing your motor insurance, always check and adjust your IDV wisely. Opt for a value close to your vehicle’s actual market price to balance premium and claim benefits.

FAQs on IDV in Motor Insurance

Q1. What is a good IDV for my car?

A good IDV should reflect your car’s current market value — not too high, not too low.

Q2. Can I change IDV during policy renewal?

Yes, insurers allow you to adjust IDV within a 10–15% range of the standard value.

Q3. Does IDV affect third-party premium?

No. IDV only affects the own damage premium, not third-party liability premium.

Q4. What happens if I choose a lower IDV?

Your premium will reduce, but so will the claim amount in case of total loss or theft.

Q5. How is IDV decided for cars older than 5 years?

For vehicles older than 5 years, IDV is mutually agreed upon by the insurer and the policyholder, based on condition and market value.

Square Insurance is a trusted name in the insurance industry, offering customers the ability to compare, buy, claim and review insurance policies at one place to ensure they receive the best possible service.