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Car Insurance Total Loss Explained

Published On Jan 09, 2022 10:00 AM By InsuranceDekho

What does the term "total loss" mean in the context of auto insurance? Learn everything there is to know about the total loss in auto insurance.

Car insurance might appear to be filled with a bewildering array of jargon that is difficult to comprehend. "Total loss" in automobile insurance is one such word that might be perplexing. Let's learn everything there is to know about this phrase and what it means, as well as some other areas of automobile insurance that are linked to it. When the expected cost of repairing a damaged automobile exceeds the car's actual monetary worth, it is considered a "total loss." This sort of claim differs from other, less serious claims in that it necessitates a little more work on the side of the insured. Here's all you need to know about complete loss vehicle insurance claims.

Car Insurance Total Loss Explained

Total Loss in Car Insurance

What is the definition of Total Constructive Loss?

Total Constructive Loss of an Automobile is a term used to describe a circumstance in which a car has been damaged to the point where restoring it would cost more than 75% of its market worth. Constructive Total Loss occurs when the cost of repairs surpasses 100% of the market worth. There are two scenarios in which a car can be completely lost:

  • Theft: 

An automobile is deemed a total loss when it is reported stolen and cannot be found.

  • Damage:

A total loss occurs when an automobile is involved in an accident that may or may not involve a third party and is damaged to the point where the cost of repair exceeds 75% of the car's IDV (Insured Declared Value).

What exactly is IDV?

The Insured Declared Value (IDV) of an automobile is the agreed-upon market price of the car, which is less than the car's ex-showroom price. It indicates the current market price of an automobile and decreases with time. It is significant to a total loss of an automobile since the cost of repair vs the IDV of a car decides whether or not the car is a total loss.

What is the formula for calculating total loss?

For the purposes of receiving reimbursement from the insurance provider, an automobile is considered a total loss if the cost of restoring it exceeds 75% of its IDV. The policyholder gets reimbursed for the vehicle's IDV regardless of total loss or constructive total loss. The IDV depreciates with time as the vehicle ages.

What is the meaning of Return to Invoice Cover?

Return to invoice cover is a vehicle insurance add-on that can be acquired for a price in order to improve an automobile insurance policy. Its role is highly important in the event of a catastrophic loss. Return to Invoice ensures that in the event of theft or entire loss due to damage, the owner gets reimbursed for the total amount on the automobile invoice at the time of purchase, not just the IDV. As a result, it fills up the difference between the IDV and the entire price, guaranteeing that the policyholder receives full reimbursement for the car's worth, not just the depreciated IDV.

Take Away

When the cost of repairing a car exceeds 75% of its IDV, it is referred to as a total loss. It might happen as a result of theft or an accident. Return to Invoice coverage is a valuable add-on to acquire to protect yourself from total damage liability since it ensures that you are reimbursed for the entire cost of the car, not just the market value.When a person's car is substantially damaged or destroyed, they are usually placed in an awkward predicament. It becomes a severe problem when an insurance company's guaranteed sum is less than the actual losses sustained.

Do read - Benefits of Cashless Car Insurance

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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