.png){kind=logo}
Your car has a price tag when you buy it. A different one a year later. And a lower one the year after that. Your car insurance policy keeps track of that changing value because it directly affects how much financial protection you actually have. That value is called IDV in car insurance.
IDV influences the premium you pay each year and also decides the maximum amount you may receive if your car is stolen or damaged beyond repair.
And yet, it is one of the most overlooked parts of a policy. Many people select it during purchase, renew the policy year after year, and rarely check whether the coverage still makes sense for their car’s current value.
Think of it as the current market value of your car after depreciation.
In simple words, it is the maximum amount your insurer may pay if:
Your car gets stolen, or
The damage is so severe that repairing it no longer makes financial sense
The IDV is calculated based on:
Your car’s age
Manufacturer’s listed selling price
Depreciation
Accessories added to the vehicle
As your car gets older, its IDV reduces. This explains why a five-year-old hatchback and a brand-new SUV do not carry the same insurance value.
Higher IDV means a higher premium. Lower IDV means a lower premium. That much is straightforward.
Where it gets tricky is when people deliberately lower their IDV in car insurance to reduce what they pay annually. It works, technically. Your premium does come down. But so does your payout if your car gets totalled or stolen.
Here is a simple way to look at it:
Your car loses value every year, and the IDV reflects that. The Insurance Regulatory and Development Authority of India (IRDAI) sets standard depreciation rates based on the age of the vehicle:
Up to 6 months old: 5% depreciation
6 months to 1 year: 15%
1 to 2 years: 20%
2 to 3 years: 30%
3 to 4 years: 40%
4 to 5 years: 50%
Beyond five years, the IDV is decided by mutual agreement between you and your insurer. This is where it pays to negotiate rather than just accept the default figure.
There is no benefit to inflating your IDV either. A higher IDV than your car's actual market value means you pay more premium without getting more in return. Insurers pay based on the car's value at the time of the claim, not the IDV you declared.
The sweet spot is an IDV that accurately reflects your car's current market value. Check what similar cars of the same make, model, year, and condition are selling for. Use that as your reference.
Most people renew their car insurance the same way every year: quickly, without checking much. But renewal is exactly when your IDV in car insurance deserves a second look.
Insurers sometimes apply steeper depreciation than necessary, which brings your IDV down more than it should. Before you confirm the renewal, check the figure they have calculated and compare it against what similar cars are actually selling for. If there is a meaningful gap, push back. It is a perfectly reasonable thing to do.
The whole process takes a few minutes. But those few minutes are what separate a policy that looks good on paper from one that actually holds up when you need it.
