IDV (insured declared value)

What is IDV?

IDV, or insured declared value, is the sum insured for the own damage section of a motor policy in India. It is meant to reflect the current market value of the vehicle and is the maximum the insurer will pay if the vehicle is stolen or declared a total loss. IDV is fixed at the start of each policy period and does not fall during that period.

IDV applies only to own damage. Third party liability has its own limits set by the Motor Vehicles Act and the government's rules.

How IDV is calculated

The method comes from General Regulation 8 of the India Motor Tariff, 2002, which insurers still follow in their policy wordings. IDV is the manufacturer's listed selling price of the vehicle's make and model at the start of the policy, less depreciation by age. Accessories not included in the listed price, and side cars, are given their own IDV on the same basis.

For vehicles older than five years and for models no longer made, IDV is agreed between the insurer and the insured rather than read from the table. The General Insurance Council hosts an online IDV calculator that applies this schedule.

Example. A car with a listed price of ₹8,00,000 that is 18 months old takes 20% depreciation. Its IDV is ₹6,40,000. Six months later, at the next renewal, it moves into the 30% band and the IDV becomes ₹5,60,000.

How IDV works at claim time

• Theft or total loss. The insurer pays up to the IDV, less the policy deductible. For a total loss the tariff rule caps the insurer's liability at the IDV less the value of the wreck, so the settlement depends on whether the owner keeps the wreck or hands it to the insurer. See salvage.
• Constructive total loss. The standard wording treats a vehicle as a constructive total loss when the cost of retrieval and repair exceeds 75% of the IDV.
• Partial loss. IDV does not change the repair payout directly. Partial claims are paid on repair cost less depreciation on parts, which is what zero depreciation cover removes.

What IDV means for distribution

• IDV drives the own damage premium. A lower IDV produces a cheaper quote, which is why some online and dealer quotes compete by trimming it. Advisers should show the IDV next to the premium in every quote and explain that a low IDV means a lower payout on theft or total loss.
• Insurers allow a band. Most insurers let the customer or distributor move the IDV within a limited range around the computed value. Using the bottom of the range to win a renewal can create a complaint when a car is stolen.
• The gap between IDV and replacement cost is real. A two year old car insured at 70% of its listed price leaves the owner short of buying the same car new, especially after price increases and on-road costs. This is the gap that a return to invoice add-on fills, and it is a natural point for an adviser to raise it.
• Older vehicles need negotiation, not a formula. Beyond five years IDV is a matter of agreement. Distributors handling used cars and commercial vehicles should record how the agreed IDV was arrived at, which helps if the value is challenged at claim.
• Accessories and CNG kits must be declared. Accessories, a factory-fitted or aftermarket CNG or LPG kit and other add-ons need to be declared and valued separately. Undeclared items are not paid for.

IDV and the principle of indemnity

Motor own damage is an indemnity cover: the customer should be put back in the position they were in, not better. IDV is the practical way the industry fixes "market value" in advance, so that both sides know the ceiling before a loss happens. See principle of indemnity.