How Much Does IDV Decrease Every Year?

Insured Declared Value (IDV) is a key component of car insurance that represents the insurer’s maximum liability in case of total loss or theft. As a car ages, its IDV decreases due to depreciation. This article provides a detailed overview of how IDV decreases annually based on IRDAI’s depreciation schedule.

What is IDV in Car Insurance?

  • IDV stands for Insured Declared Value. It is the current market value of the insured car.

  • IDV is the maximum claim amount you can receive from the insurer in case of total loss or theft.

  • A higher IDV means higher coverage but also higher premiums. Lower IDV decreases premiums but also coverage.

  • IDV directly impacts the Own Damage premium calculation in comprehensive car insurance.

IDV Depreciation Rate as per IRDAI

IRDAI has laid down the following fixed rate of depreciation for calculating IDV yearly:

Age of Car Depreciation Rate
Less than 6 months 0%
6 months – 1 year 5%
1-2 years 10%
2-3 years 15%
3-4 years 25%
4-5 years 35%
Over 5 years 50%

How IDV Decreases Yearly

As per the above depreciation rate, IDV decreases every year as the car ages based on the following pattern:

1. First Year

  • For first 6 months – No depreciation, IDV remains same as purchase value
  • Between 6 months to 1 year – 5% depreciation from purchase value

For example, if the purchase value of a new car is ₹5 lakhs,

  • For first 6 months, IDV is ₹5 lakhs
  • Between 6 months to 1 year, IDV is ₹4.75 lakhs

2. Second Year

  • 10% depreciation from last year’s IDV

Continuing the above example, in the second year,

  • IDV will be 10% less than ₹4.75 lakhs i.e. ₹4.28 lakhs

3. Third Year

  • 15% depreciation from previous year’s IDV

In the third year,

  • IDV will reduce by 15% of ₹4.28 lakhs i.e. ₹3.64 lakhs

4. Fourth Year

  • 25% depreciation from last year’s IDV

In the fourth year,

  • IDV will be 25% less than ₹3.64 lakhs i.e. ₹2.73 lakhs

5. Fifth Year

  • 35% depreciation from previous year’s IDV

In the fifth year,

  • IDV will reduce by 35% of ₹2.73 lakhs i.e. ₹1.77 lakhs

6. After 5 Years

  • 50% depreciation from last year’s IDV

After 5 years,

  • IDV will be 50% less than previous year’s IDV.

This fixed depreciation continues until IDV reaches a minimum of 10% of original purchase value.

Impact of Depreciating IDV

The decreasing IDV every year impacts car insurance in the following ways:

  • Premium Reduction – As IDV falls, own damage premium also decreases proportionately giving premium savings.

  • Lower Coverage – Reducing IDV lowers maximum claim amount receivable in case of total loss or theft.

  • Underinsurance Risk – Depreciated IDV can lead to underinsurance if it falls significantly below current market value.

  • Add-on Premiums – Premiums for add-ons like zero depreciation are calculated as a percentage of IDV. Hence, add-on premiums also decline.

  • Renewal Quotes – Insurers consider updated IDV while providing renewal quotes. Quotes vary accordingly.

  • No Claim Bonus – NCB discount percentage remains same but applies on lower IDV resulting in less savings.

Factors Impacting IDV Depreciation

While IDV reduces yearly as per the standard depreciation rate, there are some factors that impact the actual depreciation:

Model and Segment

  • Premium segment cars like SUVs, luxury sedans may depreciate slower compared to mass-market hatchbacks and sedans.

Brand Value

  • Some brands hold value better due to higher resale demand. Their IDV may depreciate at a slower rate.


  • Cars maintained in good condition through timely servicing suffer lower wear and tear depreciation.


  • Cars used less or mainly for city commutes depreciate slower than vehicles used extensively for long highway drives.

Kms Driven

  • The more kms driven annually, the higher the depreciation in IDV. Low running cars depreciate slowly.

Sale Price

  • IDV depends on original sale price. If sold below market rates initially, IDV will be lower from outset.

Demand and Supply

  • Models discontinued or phased out may see accelerated depreciation in IDV due to lower resale value.

Options to Maintain Optimal IDV

Since IDV decreases every year, what options do policyholders have to maintain adequate cover?

Increase IDV at Renewal

Most insurers allow enhancing IDV at renewal by paying the incremental premium. This helps restore cover to original purchase value.

Go for Add-ons

Add-ons like zero depreciation cover damages without accounting for depreciation. This offsets the declining IDV to an extent.

Buy Supplemental Covers

Separate policies like Return to Invoice cover the depreciation amount not covered due to lower IDV.

Evaluate Quotes

Compare renewal quotes with new policy rates. New policy IDV will be higher for same car.

Review Annually

Re-evaluate IDV at every renewal to ensure shortfall from market value does not widen significantly.

Model-wise IDV Depreciation Examples

Here are some examples of how IDV may depreciate yearly for popular car models:

Maruti Alto

Year IDV Depreciation
1st Year ₹3.2 lakhs
2nd Year ₹2.88 lakhs 10% of ₹3.2 lakhs
3rd Year ₹2.45 lakhs 15% of ₹2.88 lakhs
4th Year ₹1.84 lakhs 25% of ₹2.45 lakhs

Hyundai Creta

Year IDV Depreciation
1st Year ₹13.5 lakhs
2nd Year ₹12.15 lakhs 10% of ₹13.5 lakhs
3rd Year ₹10.33 lakhs 15% of ₹12.15 lakhs
4th Year ₹7.75 lakhs 25% of ₹10.33 lakhs

Maruti Swift

Year IDV Depreciation
1st Year ₹5.8 lakhs
2nd Year ₹5.22 lakhs 10% of ₹5.8 lakhs
3rd Year ₹4.44 lakhs 15% of ₹5.22 lakhs
4th Year ₹3.33 lakhs 25% of ₹4.44 lakhs

The extent and rate of IDV depreciation can vary based on the above-mentioned factors. But in general, it reduces yearly as cars age.

Can IDV Depreciation be Stopped?

The IRDAI depreciation rates are standard guidelines. However, some methods can help reduce IDV depreciation:

  • Zero Depreciation Cover – Converts IDV depreciation to zero and covers losses based on invoice value.

  • Comprehensive Covers – Combining own damage plus add-ons limits depreciation impact.

  • Return to Invoice Covers – Provides depreciation amount as separate cover to fill IDV gap.

  • Replacement Value Policies – Offers to replace car with new vehicle instead of depreciated IDV.

  • Fixed IDV Option – Freezes decline for up to 5 years, especially for

How To Calculate IDV in a Motor Insurance (2019)


How much idv is reduced?

What is the IDV or the depreciation percentage for car insurance every year? The IRDAI fixes the depreciation rate based on the age of the vehicle. While it is 5% for vehicles less than 6 months old, vehicles less than 1-year-old, the rate is 15% and thereafter it is 20%, 30%, 40%, and 50% every year.

What is the ideal IDV?

Therefore, if your car is less than 6 months, the IDV of your vehicle will be roughly 95% of its ex-showroom price. Once your car completes 6 months, its IDV will be around 85% of the ex-showroom price.

How do we calculate IDV?

IDV stands for Insured Declared Value. It is the maximum amount that an insurance company will pay out in case of a total loss or theft of an insured vehicle. The IDV in insurance is calculated as – the current market value of the vehicle minus depreciation based on its age and condition.

What is zero depreciation in car insurance?

Meaning. A zero dep cover is an add-on in car insurance under which we won’t charge you for depreciation during the claim settlement. In simple words, you are not required to pay for the depreciation cost while making a claim. A comprehensive policy provides coverage for own damage and damages caused to the third party …

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