Car insurance in India is mandatory, but most owners barely understand the numbers on their policy — especially Insured Declared Value (IDV) and No Claim Bonus (NCB). Here is what these terms mean, how premiums are calculated, and exactly what to do when you need to file a claim.
Third-party vs comprehensive insurance
| Type | What it covers | Mandatory? |
|---|
| Third-party liability | Damage/injury you cause to a third party's vehicle, property or person | Yes — legally compulsory under the Motor Vehicles Act |
| Comprehensive (Own Damage + Third-party) | Third-party liability plus damage to your own vehicle from accidents, fire, theft, natural calamities, etc. | No, but strongly recommended and often required by lenders for financed cars |
A "comprehensive" policy is effectively a bundle: the mandatory third-party component plus an "Own Damage" (OD) component that protects your own car. Premiums for the third-party portion are set centrally each year, while the OD premium depends on your car's IDV, age, location, and claim history.
Insured Declared Value (IDV) — the most important number
IDV is the maximum sum insured — essentially, the current market value of your car that the insurer agrees to pay if it is stolen or damaged beyond repair (a "total loss"). It is calculated as the manufacturer's listed selling price, adjusted for depreciation based on the vehicle's age:
| Age of vehicle | Depreciation applied for IDV |
|---|
| Up to 6 months | 5% |
| 6 months – 1 year | 15% |
| 1 – 2 years | 20% |
| 2 – 3 years | 30% |
| 3 – 4 years | 40% |
| 4 – 5 years | 50% |
Beyond 5 years, IDV is mutually decided between the insurer and the owner based on an inspection. A higher IDV means higher premium but a higher payout in case of total loss/theft; a lower IDV reduces premium but can leave you under-compensated. Avoid letting insurers set an artificially low IDV just to quote a "cheaper" premium.
No Claim Bonus (NCB) — your reward for not claiming
NCB is a discount on your own damage premium for every claim-free year, and it can be transferred from your old policy/vehicle to a new one when you upgrade your car (subject to conditions).
| Claim-free years | Typical NCB discount |
|---|
| 1 year | 20% |
| 2 years | 25% |
| 3 years | 35% |
| 4 years | 45% |
| 5 years | 50% (maximum) |
Key trade-off: Filing even a small claim resets your NCB to 0% at the next renewal. For minor dents or small repair costs, it is often cheaper to pay out of pocket than to lose accumulated NCB — do the math before filing.
Useful add-on covers
- Zero depreciation (Nil Depreciation): Claim settlement without deducting depreciation on replaced parts — valuable for new cars.
- Engine protection cover: Covers engine damage from water ingress (common in flooding) — not covered under standard policies.
- Return to invoice: In case of total loss/theft, pays the original invoice value of the car instead of the depreciated IDV.
- Roadside assistance: Towing, flat tyre, fuel delivery and minor on-spot repairs.
- Consumables cover: Reimburses cost of engine oil, nuts, bolts, and other consumables used during repairs.
Step-by-step claim process
For accident/damage claims (cashless)
- Inform the insurer immediately via app/helpline and note down the claim/registration number
- Take the vehicle to a network garage for cashless repair, or to any garage for reimbursement claims
- A surveyor inspects the damage and approves the repair estimate
- Pay only the deductible/excess and non-payable items (e.g., depreciation if no zero-dep add-on); the insurer settles the rest directly with the garage
For theft claims
- File an FIR with the police immediately — this is mandatory for theft claims
- Inform the insurer and submit the FIR copy, RC, and other documents
- Submit a "non-traceable" report from the police if the vehicle is not recovered within a defined period
- Hand over all keys, RC, and complete the transfer of ownership to the insurer upon claim settlement
Why premiums vary so much between quotes
- IDV selected — higher IDV increases OD premium
- NCB carried forward — directly reduces OD premium
- Add-ons chosen — each add-on adds incremental cost
- City/RTO zone — third-party premiums differ by vehicle class and engine capacity, set annually by the regulator
- Voluntary deductible — opting for a higher voluntary excess (amount you pay before insurer pays) lowers premium
Always compare quotes on a like-for-like basis — same IDV, same NCB, and same add-ons — otherwise the "cheapest" quote may simply be under-insuring your vehicle.
Frequently Asked Questions
What is IDV in car insurance and how is it different from the car’s current market value? ▼
IDV (Insured Declared Value) is the maximum amount your insurer will pay in case of theft or total loss, calculated by applying a standard depreciation schedule to the car’s original listed price based on its age. It is meant to approximate market value but is based on a fixed depreciation table rather than an actual resale valuation, so it can differ from what you might get selling the car privately.
Will I lose my No Claim Bonus if someone else damages my car and I claim from their insurer? ▼
No. If the claim is made under the other party’s third-party policy (i.e., you are the third party and they are at fault), your own NCB is not affected. NCB is impacted only when you make an "own damage" claim under your own policy.
Is it worth filing a claim for minor damage like a small dent or scratch? ▼
Often not. Filing any own-damage claim resets your No Claim Bonus to 0% at renewal, which increases your premium for several years. For minor repairs that cost less than the NCB discount you would lose, paying out of pocket is usually the cheaper option overall.