A comprehensive motor insurance cover prevents your financial situation from getting severely affected in the event of your car getting involved in an accident. An accident can result in your car getting severely damaged or destroyed. There are also times when the car is damaged beyond repair and has to be declared a total loss.
When a car is declared a total loss or is stolen, then the motor insurance company pays the insured, the Insured Declared Value or IDV. In layman terms, IDV can also be called the current market value of your vehicle.
The Definition of IDV
IDV is the maximum amount that the insured can claim from the vehicle insurance company in the unfortunate event of his car being stolen or declared a total loss. The value is based on the manufacturer’s selling price and is arrived at by deducting the depreciation of the vehicle. Furthermore, the IDV is solely the value of the vehicle as well as the accessories fitted, and does not cover the cost of insurance or registration.
How Is It Calculated?
The vehicle insurance company calculates the Insured Declared Value based on several data points. Most of these data points are found in the Registration Certificate of the vehicle. Information such as the city of registration, date of registration and type of registration can be found on this certificate; apart from other details of vehicle like the make, model, cubic capacity and ex-showroom price.
Percentage of Depreciation
As the age of the vehicle increases, the percentage of depreciation also increases. In fact, depreciation kicks in as soon as the vehicle leaves the showroom. The Insurance Regulatory and Development Authority of India (IRDAI) has stated that the maximum declared value of the vehicle cannot be more than 95% of its showroom price.
This means that depreciation takes away 5% from the showroom value of the vehicle, the minute it leaves the showroom, and this percentage stays till the vehicle is 6 months old. After that, the motor insurance company calculates the depreciation based on the following chart.
Age of the Vehicle |
Applicable Depreciation on Showroom Price (in %) |
Less than 6 Months |
5% |
6 Months - 1 Year |
15% |
1 Year - 2 Years |
20% |
2 Years - 3 Years |
30% |
3 Years - 4 Years |
40% |
4 Years - 5 Years |
50% |