IDV vs. Resale Value in Car: Why lowering your IDV to save ₹500 premium can cost you ₹50,000 during a theft claim

Most people buying car insurance focus on one thing first - the premium. And that makes sense. Insurance is something you pay for every year and hope you never use. So when you see a way to shave off Rs. 300 or Rs. 500, it feels like a small win. One of the easiest ways people do this is by lowering the IDV of their car.

It looks harmless. It even feels smart. But this one decision can quietly undo everything when you actually need the policy. Especially during a theft claim.

Let’s slow this down and talk about what IDV really means, how it connects to your car’s resale value and why saving a few hundred rupees today can cost you tens of thousands later.
 

What Does IDV Really Stand For In Real Life?

IDV is the Insured Declared Value of your car. On paper, it is the maximum amount your insurer will pay if your car is stolen or damaged beyond repair. But in real life, IDV is much more than a number in your policy document; it is the value your insurer agrees your car is worth today.

If your car gets stolen and is never recovered, the claim payout will be based on this IDV. Not on what you paid for the car, not on what you think it is worth and definitely not on what you could have sold it for in the market - only the IDV.
 

Then Why Do Insurers Let You Lower It?

When you buy or renew a policy, insurers often show a range for IDV. You can choose a higher value or a lower one within that range. Lower IDV means lower premium and higher IDV means higher premium.

This choice exists because car values drop every year. Insurers factor in depreciation, age and model trends. But the final selection is left to you. And this is where things go wrong. Most people see this as a pricing trick. Choose the lower IDV, pay less and move on. But remember, that choice comes with a trade-off that rarely gets explained properly.
 

The Missing Link Between IDV And Resale Value

Your car’s resale value and its IDV are not the same thing. Resale value is what someone in the open market is willing to pay for your car. It depends on demand, condition, brand reputation and even color sometimes. IDV is an insurance value. It follows fixed depreciation rules and insurer logic.

Now here is the problem:

In many cases, the resale value of a well-maintained car is higher than its IDV. Especially for popular models that age well. And when you lower your IDV further just to save premium, you create an even bigger gap. This gap becomes painfully visible during a theft claim.

A simple example that shows the real cost:

Let’s say you own a 4-year-old car. In the used car market, similar cars are selling for around Rs. 5 lakh. The insurer suggests an IDV of Rs. 4.7 lakh. But you see an option to reduce it to Rs. 4.2 lakh and save around Rs. 500 on the premium.

You think, “It’s an old car anyway. Why pay extra?” So you go ahead with the lower IDV.

Now imagine the car gets stolen and is never recovered.

The insurer processes the claim smoothly and then you receive Rs. 4.2 lakh. That missing Rs. 80,000 is not a mistake. It is the cost of lowering your IDV. You saved Rs. 500 for the year. You lost Rs. 80,000 in one moment.
 

Why Theft Claims Hurt More Than Accident Claims?

In accident cases, repair bills, deductibles and depreciation come into play. IDV still matters, but the impact is spread out. In theft claims, IDV is everything. The insurer simply pays the IDV mentioned in your policy. This is why theft claims expose bad IDV choices instantly. “But my car is depreciating anyway” This is a common thought and it sounds reasonable.

Yes, cars lose value every year. But depreciation in car insurance already accounts for that. When insurers calculate the IDV, they already reduce the value based on the car’s age. Lowering it further means double depreciation. Once on paper and once by choice. And resale markets do not always follow insurance depreciation tables.

Some cars hold value better. Some brands age well. Some models stay in demand for years. Your IDV does not know any of this.
 

The Premium Difference Is Smaller Than You Think

Here is another detail that gets overlooked. The premium difference between a slightly higher IDV and a lower one is usually small. Often Rs. 300 to Rs. 800 for the entire year. That amount barely changes monthly expenses. It is less than a tank of fuel or a single service visit.

But the downside risk is massive. This is one of the worst trade-offs in car insurance. Small savings now, huge loss later.
 

When Lowering IDV Might Still Make Sense

There are rare cases where choosing a lower IDV is not a bad idea. If the car is very old. If resale value is already low. If you plan to sell the car soon. Or if the insurer’s suggested IDV is unrealistically high.

But these are specific situations and not default choices. Most everyday cars used regularly and kept in good shape should have an IDV close to their fair market value.
 

What Smart Buyers Do Differently

People who understand insurance look at IDV the way they look at savings. Not as a cost to cut, but as protection to size correctly. They ask simple questions like:

• If my car disappears tomorrow, how much money will I need to replace it?
• Does my IDV come close to that number?

If the answer is no, the premium saving is not worth it.

And one reason many people make poor IDV choices is lack of clarity. Insurance platforms like SMC Insurance work with multiple insurers and help customers understand what those numbers really mean.
 

Wrapping Up,

Lowering your IDV looks like a smart move when you are staring at a premium breakup. But insurance is actually about tomorrow’s loss. Saving Rs. 500 feels good now but losing Rs. 50,000 later does not.

Before you hit buy or renew, take one extra minute. Look at the IDV, compare it with real resale prices and ask yourself what happens if the car is stolen. That single pause can save you from a regret you cannot undo later. And in car insurance, avoiding one big mistake is worth more than chasing small savings every year.

FAQs