Definition
IDV Depreciation
IDV depreciation is the standardised reduction in a vehicle's Insured Declared Value applied each year to reflect age-based loss in market value.
The Insured Declared Value is the vehicle's current market value and the maximum a motor policy pays on total loss or theft. IRDAI's tariff prescribes depreciation slabs by vehicle age, for example a set percentage off the showroom price in the first six months, rising with each year of age.
Because IDV falls every year, the sum insured and the OD premium both decline as the car ages. Owners can negotiate the IDV within a band at renewal: a higher IDV means a larger payout on total loss but a higher premium, and vice versa.
Related terms
- Own-Damage CoverOwn-damage (OD) cover compensates for damage to or loss of the insured's own vehicle from accidents, theft, fire and natural calamities.
- Insured Declared Value (IDV)Insured Declared Value is the current market value of a vehicle fixed at policy inception, representing the maximum the insurer will pay on theft or total loss.
- Total LossTotal loss in motor insurance is when a vehicle is stolen or damaged beyond economical repair, triggering settlement at the Insured Declared Value.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.