Updated on - 30 Dec 2025
Every car loses value as it gets older, and this changing value plays a major role in how your insurance policy works. One key factor that reflects this changing value is the Insured Declared Value (IDV). IDV is the current market value of your car as decided by the insurer. It represents the maximum amount you can receive if your car is stolen or completely damaged.
As a policyholder, you should be aware of how this affects insurance payouts. This blog takes you through everything you need to know about depreciated IDV in car insurance, helping you understand its role while choosing or upgrading your policy.
Depreciated IDV meaning
Depreciated IDV refers to the depreciation or reduction in the amount of your vehicle. The value of the vehicle decreases with wear and tear, as well as advancements and trends in the market. When calculating IDV in car insurance, this reduction is factored in. This IDV is applied to the actual cost of the vehicle to finalise the amount of depreciated IDV. The depreciated IDV gets calculated with the help of a simple formula:
Depreciated IDV = IDV - Depreciation Amount
As far as the depreciation amount is concerned, the rate is standardised and set by IRDAI (Insurance Regulatory and Development Authority of India).
To understand the depreciated IDV, let’s take a look at how IDV is calculated. The following components of the car are taken into consideration while calculating the IDV in your car insurance policy:
1. Car type
The category of the vehicle determines its IDV, such as SUV, MUV, sedan or hatchback. Moreover, SUVs have higher IDV values than sedans, which have higher IDV values than hatchbacks.
2. Make and model of the car
The brand and the model of the car directly impact the IDV. Different brands have different values within the same vehicle type.
3. Age and depreciation cost
The age of the vehicle and depreciation cost directly impact the IDV value of the car. New vehicles have higher IDV and less depreciation cost, and vice versa.
4. Registration location
The place where the car is registered also affects the car’s IDV because of the varying showroom prices of the car company across the region.
5. Accessories
Even the accessories you add to your vehicle depreciate over time. This depreciation in the added accessories is also taken into consideration while calculating the IDV.
Importance of understanding the depreciated IDV for policyholders
Understanding depreciated IDV is important because it determines the maximum amount you receive if your car gets stolen or completely damaged. It helps you avoid being underinsured or paying for unnecessary coverage by reflecting the car's current market worth rather than its initial cost. Being aware of depreciation helps you strike a balance between cost and protection because IDV has an impact on your premium.
Calculating IDV also help you make better renewal decisions and choose add-ons like zero depreciation more effectively, ensuring your car insurance gives proper financial security.
How depreciated IDV impacts your car insurance premium
Depreciation is the primary factor that reduces your car's IDV each year. The IDV drops according to the vehicle's age and market value. A lower IDV means you'll pay a lower premium because the insurer is covering a lower value. It also lowers the reimbursement you get if the automobile is stolen or deemed a total loss. In short, higher depreciation lowers both your premium and the compensation you can claim.
Tips to maintain a good IDV for your vehicle
Maintaining a good IDV helps keep your value strong and ensures better coverage during claims. Here are a few smart habits to maintain a good IDV:
- Keep your vehicle well-maintained to slow down wear and tear.
- Repair dents, scratches and minor damages on time.
- Avoid installing non-approved accessories that do not add value to IDV.
- Choose genuine parts during repairs to ensure the vehicle retains its market value.
- Update your policy on time to avoid lapses that may reduce the assessed value.
- Use add-ons like zero depreciation to protect IDV during claims.
- Keep service records handy to show proper upkeep when negotiating IDV at renewal.
Choosing the right car insurance policy with optimal IDV
Choosing the right car insurance policy with optimal IDV starts with understanding your car’s current market value. The IDV in car insurance should not be set too high or too low. A very high IDV increases your premium unnecessarily, while a very low IDV reduces your claim amount in the event of total loss or theft.
Compare policies from different insurers, check the IDV they offer and choose one that matches the realistic value of your vehicle. A balanced IDV ensures fair premiums and strong financial protection.
Why depreciated IDV matters during a car insurance claim
Depreciated IDV matters during a car insurance claim because it directly decides how much reimbursement you will receive if your car is stolen or declared a total loss. Since IDV reflects your car’s current market value after depreciation, the insurer will use this amount to calculate your final payout. A lower IDV means a smaller claim settlement. While a well-set IDV ensures fair compensation.
Conclusion
Understanding depreciated IDV gives you more control over your car insurance policy. It enables you to make more informed decisions, whether you're renewing your policy, purchasing add-ons or determining if the premium you're paying aligns with the value of your vehicle. Knowing how IDV works, you can avoid guesswork and prevent losses during a claim.
So, you should choose a car insurance policy that strikes the right balance between value and financial protection. Always focus on a policy that suits your needs, budget and the actual value of your vehicle. If you need expert guidance to help you select the right plan for your needs, fill out the form provided on this page.
FAQs
1. Can you negotiate the IDV in my car insurance policy?
Yes. Insurers allow a small range for adjusting IDV. You can increase or decrease it within limits, but it must still match your car’s realistic market value.
2. Does a high IDV always mean better coverage?
A higher IDV increases your premium. It helps during total loss claims, but it may not be necessary if your car is old and has low resale value.
3. How does IDV affect add-ons like zero depreciation?
Zero depreciation doesn’t change the IDV, but it helps you get a higher repair payout by removing depreciation cuts. Your IDV still applies only in total loss claims.
4. Will installing accessories increase IDV?
Only if they are declared and approved, factory-fitted accessories that affect IDV automatically. Extra accessories increase IDV only when you declare their value in the policy.
5.Does IDV matter in every type of insurance claim?
IDV matters only in total loss and theft claims under a comprehensive or own damage plan. For a standard repair claim, the payout depends on the extent of the damage and the cost of the parts. In third-party claims, IDV is not used at all because it does not cover damage to the owner's vehicle.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.