IDV, zero depreciation and NCB: the three numbers that decide your motor claim
Owners shave the IDV down to cut the premium, then discover that a total-loss settlement is paid on exactly that number. Here is what IDV, zero depreciation and NCB are worth, in rupees.
A car policy carries three numbers that almost nobody reads, and all three are settled at the quote stage. Get them wrong and you find out on the one day you cannot do anything about it - the day the car does not come back.
IDV is not a slider. It is the cheque
Insured Declared Value is the maximum the insurer will pay if your car is stolen or written off. It is not a valuation you argue into existence. The basis is fixed: the manufacturer listed selling price of that model and variant, less a depreciation percentage set by IRDAI according to the age of the vehicle.
| Age of vehicle | Depreciation applied to listed price |
|---|---|
| Not exceeding 6 months | 5% |
| Over 6 months to 1 year | 15% |
| Over 1 year to 2 years | 20% |
| Over 2 years to 3 years | 30% |
| Over 3 years to 4 years | 40% |
| Over 4 years to 5 years | 50% |
| Above 5 years | Mutually agreed, after inspection |
Accessories fitted outside the factory are valued on the same scale and added separately. Past five years there is no table at all: insurer and owner agree a figure, usually after somebody physically looks at the car. That is why a well-kept older vehicle is worth negotiating over and a neglected one is not.
The mistake, worked through
Own damage premium is charged as a percentage of IDV. Lower the IDV and the premium genuinely falls, which is precisely why the temptation exists - and why comparison sites quietly let you drag the number down.
Take a hatchback with a listed price of ₹12,00,000, now three and a half years old. The correct IDV is ₹12,00,000 less 40%, or ₹7,20,000. The owner is offered a range and picks ₹5,40,000 because the premium looks better.
| Line | Correct IDV | Under-declared IDV |
|---|---|---|
| IDV on the schedule | ₹7,20,000 | ₹5,40,000 |
| Own damage premium at roughly 3% | ₹21,600 | ₹16,200 |
| Annual saving | - | ₹5,400 |
| Paid out on theft or total loss | ₹7,20,000 | ₹5,40,000 |
| Shortfall | - | ₹1,80,000 |
That is ₹1,80,000 of exposure bought for ₹5,400 a year. You would need thirty-three consecutive claim-free years for the saving to catch up with the loss, by which point the car is scrap.
There is a second effect that is even less obvious. A car is declared a constructive total loss when the repair estimate crosses roughly 75% of IDV. A ₹4,20,000 repair against an IDV of ₹7,20,000 is 58% - the car gets repaired. The same repair against ₹5,40,000 is 78% - the car is written off and you are handed the lower figure, less salvage. Under-declaring does not only shrink the payout, it makes the payout more likely to be the thing that happens.
Zero depreciation: who pays for the bumper
On an ordinary own damage claim the insurer does not pay the full price of a replaced part. It deducts depreciation on the part itself - a flat 50% on plastic, rubber and nylon components, and a rising scale on metal parts that reaches 40% by the fourth year. Depending on what broke, the deduction lands somewhere between 25% and 50% of the parts bill. A zero depreciation cover waives it.
Front-end damage on that same three-and-a-half-year-old car: parts ₹52,000, of which ₹30,000 is bumper, grille, lamps and trim and ₹22,000 is metal panels. Labour and paint ₹16,000. Total ₹68,000.
| Line | Without zero depreciation | With zero depreciation |
|---|---|---|
| Plastic and rubber parts, 50% deducted | ₹15,000 on you | Nil |
| Metal parts, 30% deducted | ₹6,600 on you | Nil |
| Compulsory deductible | ₹1,000 | ₹1,000 |
| You pay | ₹22,600 | ₹1,000 |
The add-on typically costs 15% to 20% on top of the own damage premium - on a ₹21,600 base, somewhere near ₹3,500 a year. One moderate collision repays six years of it. It is worth carrying up to roughly the five-year mark, after which the car is cheap enough that the depreciation deduction stops being frightening, and most insurers stop offering the cover anyway.
No Claim Bonus: a discount you can lose for ₹8,000
| Consecutive claim-free years | Discount on own damage premium |
|---|---|
| After 1 year | 20% |
| After 2 years | 25% |
| After 3 years | 35% |
| After 4 years | 45% |
| After 5 years | 50% |
Two things about NCB are consistently misunderstood. It belongs to the owner, not the car - sell the vehicle and the bonus moves with you to the next one. And it is fully transferable between insurers: all the incoming insurer needs is the outgoing renewal notice or a no-claim letter. Nobody is doing you a favour by honouring it. Buyers who switch on a price-comparison site and forget to claim it simply pay half as much again as they should.
One claim takes the slab to zero. Suppose you are sitting at 50% on that ₹21,600 base premium and you put in a ₹9,000 claim for a cracked windscreen and a scraped door.
| Own damage premium | No claim made | After one claim |
|---|---|---|
| Next renewal | 50% off - ₹10,800 | 0% - ₹21,600 |
| Renewal after that | 50% off - ₹10,800 | 20% off - ₹17,280 |
| Third renewal | 50% off - ₹10,800 | 25% off - ₹16,200 |
| Three-year total | ₹32,400 | ₹55,080 |
The claim put ₹8,000 in your pocket after the compulsory deductible. It took ₹22,680 back out over the following three years. The rule that follows is blunt: below roughly ₹20,000 on a mature NCB slab, pay it yourself.
The NCB Protect add-on changes that calculation. For a modest premium it lets one claim in a policy year pass without the slab resetting, so you keep your 45% or 50%. On any car where you are near the top of the scale it usually pays for itself the first time something cracks.
The part you do not get to choose
Third-party cover is compulsory under the Motor Vehicles Act 1988. It is the only element of a motor policy the law requires you to hold. It pays for injury or death caused to a third party, and for third-party property damage up to ₹7.5 lakh. It pays nothing whatsoever toward your own vehicle - IDV, depreciation and NCB all live on the own damage side, which is optional in law and indispensable in practice.
What to do at your next renewal
- Read the IDV on the schedule against the depreciation table above. If it is materially lower, ask why before you accept the quote.
- Carry zero depreciation while the car is under five years old.
- Carry NCB Protect once you are past the 35% slab.
- Never let the policy lapse. A break in cover forfeits the accumulated NCB entirely, and unlike health insurance there is no grace mechanism that restores it.
We check those four lines on every schedule we place. If you want yours read before you renew, that is what we do on motor insurance, and there is no fee for it. If you run a fleet or commercial vehicles the same numbers apply on different scales - that sits under commercial lines and is worth a separate conversation.
