What Is Insured Declared Value (IDV) in Car Insurance?

What Is Insured Declared Value (IDV) in Car Insurance?

Introduction (Real Problem-Based)

In Pakistan, many car owners purchase insurance just to meet formal requirements. They buy a policy, pay the premium, and forget about it until something unfortunate happens. The real problem begins when their vehicle is stolen or involved in a major accident and they file a claim — only to find out that the insurance company is offering a settlement amount much lower than expected.

At that moment, most people say, “My car was worth more than this in the market. Why is the claim so low?”

The answer often lies in something called Insured Declared Value (IDV).

IDV is one of the most important yet misunderstood terms in car insurance. It directly determines how much money you will receive from your insurance company if your vehicle is stolen or declared a total loss due to an accident.

If you choose the wrong IDV while purchasing your policy, you may end up paying premiums for years but still face financial loss when you need support the most.

In this article, you will learn what IDV means, how it works in comprehensive car insurance, how it affects your claim amount, and how you can select the right IDV to protect yourself from unexpected financial setbacks.

How Comprehensive Car Insurance Works

Comprehensive car insurance provides financial protection against both third-party liabilities and damages to your own vehicle. Unlike third-party insurance, which only covers damage caused to others, comprehensive insurance also protects your own car against a wide range of risks.

A standard comprehensive policy may cover:

Damage caused by accidents
Vehicle theft
Fire incidents
Natural disasters such as floods or storms (if included)
Riots or vandalism (if included)
Third-party liability

There are usually two types of claims under comprehensive insurance:

Repair Claim (Partial Loss)
If your car is damaged in an accident but can be repaired, the insurance company will pay for repair costs as per the workshop estimate after applicable deductions.

Total Loss or Theft Claim
If your car is stolen or damaged beyond economical repair, the insurance company will compensate you based on the Insured Declared Value mentioned in your policy.

In simple terms:

IDV is the maximum amount your insurer will pay if your car is stolen or completely destroyed.

Who Should Buy It?

IDV applies to every comprehensive car insurance policy. However, it becomes especially important for the following vehicle owners:

Owners of new or recently purchased vehicles
Individuals who have financed or leased their cars
Buyers of used vehicles
Residents in high theft-risk areas
Drivers living in flood-prone locations

If your car is financed through a bank and you lose it in an accident or theft, you may still be responsible for paying loan installments. Choosing an accurate IDV can prevent you from suffering major financial loss in such situations.

Benefits

Selecting the correct IDV in your car insurance policy offers several advantages:

Ensures fair financial compensation in case of total loss
Reduces the chances of claim disputes
Provides peace of mind during emergencies
Helps balance insurance premium and coverage
Protects your vehicle’s actual market value

A realistic IDV ensures that you are neither overpaying for insurance nor underinsured during a claim.

Limitations

While IDV is essential, there are certain limitations you should understand:

Vehicle value decreases over time due to depreciation
Higher IDV leads to higher premium payments
Lower IDV results in lower claim settlement
Accessories may not be covered unless declared
Claim amount cannot exceed the selected IDV

Choosing an extremely low IDV just to save on premium may leave you financially exposed in case of total loss.

Estimated Cost in Pakistan

In Pakistan, the insurance premium is usually calculated as a percentage of the vehicle’s IDV. The actual premium varies depending on factors such as vehicle type, city, insurer, and add-ons selected.

Here is a general estimate:

IDV PKR 700,000 → Premium approx PKR 18,000 to 30,000 per year
IDV PKR 1,500,000 → Premium approx PKR 35,000 to 65,000 per year
IDV PKR 2,500,000 → Premium approx PKR 60,000 to 110,000 per year

Premium may increase if you add optional covers such as flood protection, terrorism cover, tracker-based discounts, or zero depreciation benefits.

Factors That Affect Premium

Insurance companies calculate premiums based on multiple factors, including:

Vehicle make and model
Manufacturing year
Engine capacity
Area of registration
Previous claim history
Security features such as tracking devices
Deductible amount
Policy add-ons
Selected IDV

As the IDV increases, the insurer’s financial risk also increases, which typically results in a higher premium.

Real Example Scenario

Suppose you purchased a used sedan with a current market value of PKR 1,800,000.

The insurance company may offer you an IDV range such as:

PKR 1,500,000 (Lower Option)
PKR 1,700,000 (Balanced Option)
PKR 1,900,000 (Higher Option)

To reduce your premium, you select the lowest IDV of PKR 1,500,000.

Now imagine your car gets stolen.

After claim approval, the maximum amount you will receive is PKR 1,500,000 — even though your car’s market value was PKR 1,800,000.

This means you suffer a direct financial loss of PKR 300,000.

If you had selected a balanced IDV of PKR 1,700,000, your financial loss would have been significantly lower.

Tips Before Buying

Before finalizing your car insurance IDV, consider the following tips:

Check your car’s current resale market value
Avoid selecting a very low IDV just to save on premium
Do not overstate the vehicle’s value unnecessarily
Declare all accessories such as infotainment systems or alloy wheels
Compare IDV ranges offered by different insurers
Understand deductible terms in your policy
Revise your IDV annually at the time of renewal
Read policy exclusions carefully

Selecting a realistic IDV ensures better financial protection when it matters most.

FAQs

What is IDV in simple terms?
IDV is the insured value of your car that determines the maximum claim amount in case of theft or total loss.

Does IDV apply to minor repairs?
No, minor repair claims are settled based on actual repair costs.

Can I change IDV during renewal?
Yes, insurers usually allow IDV adjustment at the time of policy renewal.

Is registration cost included in IDV?
No, IDV represents only the current market value of the vehicle.

Will a low IDV reduce my premium?
Yes, but it will also reduce your claim settlement in case of total loss.

Are accessories included in IDV?
Only if they are declared in the insurance policy.

Conclusion

Insured Declared Value (IDV) is one of the most important components of a comprehensive car insurance policy. It directly affects how much financial compensation you will receive if your vehicle is stolen or declared a total loss.

Ignoring IDV or choosing an unrealistic value can result in significant financial loss during claim settlement.

By selecting an IDV that closely matches your vehicle’s current market value, you can ensure a balanced premium and fair claim payout.

Always review your IDV carefully before purchasing or renewing your insurance policy.

Author Bio

Ali Raza is a motor insurance content specialist with over five years of experience analyzing car insurance policies in Pakistan. He focuses on simplifying technical insurance concepts to help vehicle owners make informed financial decisions.