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Car or Two Wheeler Insurance renewal in India-What is IDV or Depreciation Value?

August 26, 2014by Basavaraj Tonagatti

Do you feel your car as an asset? Think twice! Reason is, from the insurance point of view this not at all considered as an asset. Instead, insurance companies consider it as a liability, whose value starts to depreciate immediately when you buy a new car or bike 🙂

Usually to arrive at value of vehicle or two-wheeler, insurance companies need to calculate the valuation to judge the premium. Such valuation will be very much important in case of complete loss or theft of vehicle. So you may say that in case of complete loss or theft of vehicle this valuation amount will be payable to you. Such valuation called IDV or Insured Depreciation Value.

How IDV or Insured Depreciation Value calculated?

As I said above this is the actual value of your vehicle in today’s term. IDV calculated on manufacturer’s listed price adjusted for depreciation based on the age of the vehicle.

Manufacturers Listed Selling Price= (Cost Price+Local Duties+Taxes)

Note-Excludes Registration and Insurance cost of the vehicle.

Accessories, which are not part of the fittings, are not included to arrive at such listed price. So if one need insurance for such materials then it calculated separately.

So total IDV= (Manufactured Listed Selling Price-Depreciation) + (Cost of Accessories that not included in Manufacturer’s listed selling price-Depreciation).

However, I am unable to find how insurance companies arrive at the depreciation value of accessories which includes glass, rubber or of any kind of materials.

Below is the depreciation table, which helps you to understand each year how your vehicle valuation will go on decreasing based on insurers.

Car Insurance renewal in India

You notice that after 5th year the valuation will drastically go down to below 50%.

Points to remember-

  • Your premium depends on the IDV of vehicle.
  • Lower IDV leads to lower premium.
  • However, after 5th year it is the agreed value between insurer and insured. So never be in a mood that to pay a lower premium by lowering your IDV. Because in case of loss or theft this is the actual value, you receive. So be careful while arriving at IDV.
  • At the same time, do not overestimate IDV after the 5th year, as there is a possibility that such valuation may not be agreeable to your insurer.
  • Finally, think twice whether your car is an asset or liability 🙂
Category: Insurance PlanningTag: Car Insurance Renewal in India, IDV, Insured Depreciation Value, Two wheeler Insurance in India

About Basavaraj Tonagatti

Basavaraj Tonagatti is the man behind this blog. He is SEBI Registered Investment Adviser who is practicing Fee-Only Financial Planning Process and also an Independent Certified Financial Planner (CFP), engaged in blogging since 7 years. BasuNivesh blog is ranked as one among India's Top 10 Personal Finance Blog. He is not associated with any Financial product/service provider. The purpose of this blog is to "Spread personal finance awareness and make them to take informed financial decisions." Please note that the views given in this Blog/Comments Section/Forum are clarifications meant for reference and guidance of the readers to explore further on the topics/queries raised and take informed decisions. These should not be construed as investment advice or legal opinion."

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Reader Interactions

Comments

  1. Rohit

    April 4, 2017 at 8:14 PM

    Sar my car Idv is 525000 my car theft in cavrd insurance. Comny pay to mi only 20000 i ‘ll cleam in court plzz give mi law point

    Reply
    • Basavaraj Tonagatti

      April 4, 2017 at 9:52 PM

      Rohit-Whether they pointed for what purpose they paid this much amount?

      Reply
  2. prakash babu

    July 7, 2016 at 12:18 PM

    My two wheeler IDV was Rs.29,636 on 25/07/2015.My vehicle Purchase date is 28/05/2009.What will be my current IDV?

    Reply
    • Basavaraj Tonagatti

      July 7, 2016 at 3:06 PM

      Prakash-It depends on insurer. Check with the insurance company.

      Reply
  3. shrikant

    May 28, 2015 at 11:21 AM

    Sharanu Sharnarth Basavraj Appa,

    Need your guidance on the IDV part!! Does it include Basic cost + Local Taxes and Duties ( Apart from Registration, RTO) and What accesories would become part of IDV?

    Please note that i have purchased a brand new activa 3g 58500 On Road Plus Accessories whereas after receiving the insurance copy, the IDV shown at Rs. 47000. When i inquired abt it with the Retailer, all he has to say that the amt is calculated on a basic cost i.e. Rs.49000 – 5% Depriciation and it does not include On road cost!

    Please guide.

    Reply
    • Basavaraj Tonagatti

      May 28, 2015 at 11:56 AM

      Shrikant-Basic cost arrived at a value of a vehicle which is before tax and any duties. Accessories list depends on a vehicle to vehicle. I can’t list down all of them here. Yes, your dealer is right.

      Reply
      • shrikant hingmire

        May 28, 2015 at 12:33 PM

        Thanks!! You are doing an awesome job!!

        Reply
  4. Avinash

    May 21, 2015 at 10:05 AM

    (1)Public Sector Insurance Companies issue an Vehicle Insurance Policy and cover note as per Form 51 & 52 of MV Act which is stamped with an Insurance Stamp.
    (2)The private Insurance companies issue a paper document called “Certificate cum Policy Schedule” in form of a singleXerox page, stating details but no stamp and not as per form 51& 52 of MV Act.
    (3)Insurance Policy Document as per Motor Vehicle Act (as available over the website oh RTO,Maharashtra)the Policy and Cover note should only be as per Form 51 & 52.

    (4)Unfortunately the policy I am having is not in above format. The title of document ( past three policies in my possession) is termed as “Certificate Cum Policy Schedule”
    (5)In case of any litigation in future as regards claim will it not create problem as No Policy document was issued or not in my possession.
    How Private Insurance companies disregard the written law ? I wrote to the concerned Insurance company twice with reminders but they did not answer my point ?

    Reply
    • Basavaraj Tonagatti

      May 21, 2015 at 11:02 AM

      Avinash-How about the states where using stamp paper is totally banned?

      Reply
      • Avinash

        May 21, 2015 at 11:49 AM

        Sir,
        I am not talking about use of Stamp Paper ! It is an adhesive Insurance stamp pasted over simple paper where all details about terms & conditions are written and as per format stated above as per MV Act. In case company has paid the stamp fee to government in a lot,then they can state accordingly .
        Why private Insurance company avoid to answer my simple question about following the rules stated in MV Act ?
        This action leads to an doubt (may not be true) about some malpractice of issuing Vehicle Insurance policies without any record and settling the claims from the huge amount so received !!!

        When we buy a new vehicle, the Car agency says that they have a good tie-up with this company and for hassle free settlement of accident claims they advise to go for the same. In case the customer chooses other company then they will not help at all !!!

        Reply
        • Basavaraj Tonagatti

          May 22, 2015 at 7:28 AM

          Avinash-Insurance companies can’t issue the policies without any record. Also, they can’t manipulate their book as per their wish. There are so many regulators like IRDA and even companies act will also play a role.

          Reply
          • Avinash

            May 22, 2015 at 9:47 PM

            Sir, I understand the explanation given by you but still not satisfied about companies issuing a single page that too xeroxed and without any signature ? When we pay in thousands for Insurance Cover of our car then why such a casual approach ? Does these lines of the Policy Document

            Quote:
            …………………. in Witness whereof this Policy has been signed at ………………. this ………..day of ……………………………. in lieu of cover Note No. …………….. Date ……………………………….. Receipt No. ……………………….Date ……………………….. Address of issuing office (Duly Constitute

            UnQuote: are of no importance to the Car owner ?

            Reply
            • Basavaraj Tonagatti

              May 23, 2015 at 9:09 PM

              Avinash-I don’t own car. So hard for me to check at my end 🙂 But I still firmly say that they can’t mishandle the money on their own.

              Reply
              • Avinash

                May 27, 2015 at 8:40 AM

                That’s true, it is difficult to mishandle your money but then the definition/format of Auto Insurance Policy be changed to suit the whims of some private Insurance Companies !!!

                Reply
                • Basavaraj Tonagatti

                  May 28, 2015 at 10:20 AM

                  Avinash-You can’t change, at the same time, they can’t cheat the buyers too.

                  Reply
  5. kamlesh

    April 15, 2015 at 8:38 AM

    does in any case two wheeler idv increases for 3 yrs.
    my Honda active fore last 3 yrs IDV has increased from 17000–17500-18000-20000.my model is of 2003 and initial idv was 42000/-.pls guide

    thanks

    Reply
    • Basavaraj Tonagatti

      April 15, 2015 at 1:47 PM

      Kamlesh-How can IDV increases? Infact it defenitely decreases.

      Reply
  6. raj hans

    November 4, 2014 at 10:14 PM

    Sir,
    IDV stands for Insured Declared Value.
    In your article at one place u have inadvertently mentioned it as insured depreciation value.

    Reply
    • Basavaraj Tonagatti

      November 5, 2014 at 9:41 AM

      Raj-Thanks for your point. But while declaring the value what you are quoting? The current value which is also called depreciated value of original vehicle value. That is the reason I mentioned so. Long form of IDV may be of what you said.

      Reply
  7. Teja

    August 29, 2014 at 4:42 PM

    Hi Basu,

    I think, the insurers cheat consumers by showing the reduced premium each year projecting it as a result of NCB (no claim bonus) when it is actually due to the reduced IDV. Is it true or just my assumption?

    Thanks.

    Reply
    • Basavaraj Tonagatti

      August 29, 2014 at 6:44 PM

      Teja-Yes both NCB and IDV reduces premium. Your understanding is correct.

      Reply
  8. Chandra

    August 28, 2014 at 9:14 AM

    Hello Basu,

    Thanks for choosing this topic..

    Good to know this.

    Thanks again.

    Thanks,
    Chandra

    Reply
    • Basavaraj Tonagatti

      August 28, 2014 at 10:09 AM

      Chandra-Pleasure 🙂

      Reply

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