The Concept of Total Loss in Car Insurance – Decoded

A car damaged beyond repair can be heart-breaking. Cars come second to home for many and there could be a lot of emotions involved. Moreover, losing a car could mean losing the primary means of transportation. Even then, one thing that can come to your rescue to help you get a new car is your car insurance policy. This scenario is called total loss and you could claim the insured value of your vehicle from your insurer.

Car Insurance

What is a total loss?

Your vehicle can be deemed a total loss if the expected cost of repair for your damaged vehicle exceeds 75% of the insured declared value. Here, insured declared value or IDV is the approximate market value of your vehicle. For example, if your car’s insured declared value or current market value is Rs.10 lakh and the cost for repair exceeds Rs.7.5 lakh, your vehicle will be declared a total loss. Theft of your vehicle would also be considered as a total loss. If the cost of repair exceeds 100% of the insured declared value of the vehicle, it is considered a constructive total loss. * Standard T&C Apply

Insurance claim in total loss cases

In the case of a total loss, you have the right to claim your vehicle insurance, subject to standard terms and conditions of your insurance policy.

Under insurance claim, your insurer will pay to you the amount that is equal to your insured declared value or IDV. IDV is also subject to depreciation over time, based on the age of your car. For example, the IDV of your vehicle depreciates 5% if your vehicle’s age is between six months and one year.

The below table will show you the depreciation percentage according to your vehicle’s age.

Not exceeding 6 months5%
Exceeding 6 months but not exceeding 1 year15%
Exceeding 1 year but not exceeding 2 years20%
Exceeding 2 years but not exceeding 3 years30%
Exceeding 3 years but not exceeding 4 years40%
Exceeding 4 years but not exceeding 5 years50%

For vehicles that are older than 5 years, the owner of the vehicle can declare the IDV at the time of purchase or renewal of the insurance policy.

What should you do in case of a total loss?

The first and most important step in a case of a total loss is to cancel your vehicle’s registration. You have 14 days to report it to your RTO after the damage or theft happens. Cancelling vehicle registration is important not only in claiming the insurance, but it also gives you a legal cover if spare parts of your damaged car are used for anything illegal by a scrap dealer. After the registration is cancelled, you can contact your insurance provider and start the proceedings for the claim.

When can you not claim for a total loss?

You cannot claim for total loss in scenarios where you have violated the terms and conditions of the insurance contract. This includes the car being driven by someone without a driving license at the time of the accident or if the car is in a geographical area outside of insurer’s coverage range. You can also not make a claim for total loss if you do not have a comprehensive car insurance policy. The reason being that this cover is part of the own-damage insurance, and not the third-party insurance.

While only third-party insurance for your car is mandated by law, it is always advisable to go for a comprehensive insurance cover so that you are not caught off-guard at any unfortunate moment. Accidents and thefts, though unfortunate, mostly happen unannounced and in these scenarios, an insurance could prove to be of great help. Also remember, insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.

Dennis Bailey

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