IDV in Car Insurance: The Number That Decides Your Claim Payout
By Nitish Bharadwaj · Published Jun 21, 2026 · 5 min
When your car is stolen or totalled, the insurer pays the IDV — Insured Declared Value — not the open-market price. IDV is computed using IRDAI's depreciation schedule applied to your car's ex-showroom price, and it is the ceiling on every theft or total-loss claim. Set it too low and you save hundreds on premium but risk a shortfall of several lakhs at claim time. This guide explains how IDV is calculated and how to set it correctly at every renewal.
Your car gets totalled in an accident. The surveyor submits his report. And then the insurer settles for ₹5.2 lakh — not the ₹8 lakh you were expecting. Why? Because the IDV on your policy was set too low at renewal, and you never noticed. IDV — Insured Declared Value — is the single number that determines the maximum your insurer will ever pay in a theft or total-loss claim. Here is how it works and how to get it right.
What Is IDV?
IDV is the maximum amount your insurer will pay if your car is stolen or declared a total loss — which the standard motor policy treats as a constructive total loss when repair costs exceed 75% of IDV. It is not the price a buyer would offer on OLX — it is a regulated figure derived from your car's manufacturer-listed ex-showroom price minus depreciation set by IRDAI. Think of it as the insured market value of your vehicle for the policy year.
How IRDAI Calculates IDV
The formula: IDV = Manufacturer's Listed Ex-Showroom Price − Depreciation (per IRDAI schedule). Accessories not included in the manufacturer's listed price are added separately, after applying the same depreciation. Depreciation is not a smooth annual percentage — it follows the bracket system below, as set out in the IRDAI Motor Tariff.
| Vehicle Age | Depreciation Rate | IDV Factor on Ex-Showroom Price |
|---|---|---|
| Up to 6 months | 5% | 0.95× |
| 6 months – 1 year | 15% | 0.85× |
| 1 – 2 years | 20% | 0.80× |
| 2 – 3 years | 30% | 0.70× |
| 3 – 4 years | 40% | 0.60× |
| 4 – 5 years | 50% | 0.50× |
| Beyond 5 years | Mutually agreed | Negotiated with insurer |
Example: A car purchased for ₹12 lakh (ex-showroom) at age 2.5 years falls in the 2–3 year bracket (30% depreciation). IDV = ₹12,00,000 × 0.70 = ₹8,40,000. At age 4 years: ₹12,00,000 × 0.60 = ₹7,20,000.
IDV and Your Own-Damage Premium
Your own-damage (OD) premium is a percentage of IDV. A lower IDV means a lower premium — which is why insurers and aggregator websites sometimes default to the minimum permissible IDV when generating quotes. A ₹1 lakh reduction in IDV typically saves only ₹2,000–₹3,000 on OD premium annually. In a total loss or theft, that same ₹1 lakh shortfall comes out of your pocket.
Cars Older Than 5 Years: Negotiate Your IDV
For cars older than 5 years, IRDAI does not prescribe a depreciation rate. The IDV is mutually agreed between you and the insurer. Insurers may quote a conservatively low figure. Counter with condition, service history, and current used-market data for your model. Get quotes from two or three insurers and compare the agreed IDV — not just the premium.
How to Set IDV Correctly at Renewal
- At renewal, note the IDV shown in the quote — do not accept it without verification.
- Compute your own IDV: find the ex-showroom price, apply the IRDAI bracket above, and confirm the insurer's figure is close.
- Insurers typically offer IDV within a band around the computed figure; if your car is in excellent condition, request the higher end.
- Do not lower IDV to save ₹500–₹1,500 on OD premium — in a total loss, that saving becomes a far larger shortfall.
- For cars over 5 years: ask the insurer what the agreed IDV is based on, and compare at least two quotes before renewing.
For the full renewal workflow — NCB slabs, comparing online quotes without being misled by different IDVs, and the add-on decisions by vehicle age — see our car insurance renewal guide for 2026.