Total Loss in Car Insurance Explained
What is the meaning of total loss in vehicle insurance? Understand all about total loss in vehicle insurance.
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There are many factors that you should consider while purchasing a car insurance plan. One such factor is total loss insurance. In this article, we’ll explain everything you need to know about total loss car insurance. Continue reading to learn more.
Meaning Of Total Loss In Car Insurance
A total loss can be described as the situation when a car is damaged to such an extent that the cost of repairing the car exceeds its insured declared value (IDV). Generally, when the repair cost of the vehicle exceeds 75% of the car’s IDV, it is considered a total loss. Below are the circumstances under which total loss of a car occurs.
- Accidental Damages: When a car is involved in an accident, whether or not a third party is involved, and the cost of repair exceeds 75% of the car's IDV (Insured Declared Value), the situation will be considered a total loss.
- Loss by Theft: A situation where the car is stolen and the authorities fail to track the location of the car.
In these circumstances, the insurance provider reimburses an amount equivalent to the IDV of the car.
What You Should Do In Case Of Total Loss?
If your car is completely damaged, then you can trade with a scrap dealer for the remaining parts of the car. Moreover, according to section 55 of the Motor Vehicles Act, 1988 you must give notice to the nearest RTO office within 14 days of the total damage to terminate your RC certificate. It is mandatory by the law to avoid committing any form of fraud in someone else's name.
How To Calculate Total Loss In Car Insurance?
When seeking compensation from the insurance provider, a car is deemed a total loss if the cost of repairing it exceeds 75% of its IDV. No matter if the car is a total loss or a constructive total loss, the policyholder is given payment up to IDV. Based on the vehicle's age, the IDV decreases over time. Below is the breakdown of depreciation that must be taken into account when calculating the vehicle’s insured declared value.
|
Vehicle’s Age |
Depreciation Rate |
|
Below 6 months |
5% |
|
6 months - 1 year |
15% |
|
1 year - 2 years |
20% |
|
2 years - 3 years |
30% |
|
3 years - 4 years |
40% |
|
4 years - 5 years |
50% |
|
5 years and above |
Mutually decided by the insurance company and policyholder |
Let’s understand in detail with the help of an example.
Suppose, you bought a car 6 months ago at the price of Rs. 5,00,000. Therefore, in the case of a total loss, the insurance company would be liable to pay Rs. 4,25,000 as compensation to the policyholder. This is because the vehicle was obliterating at a 15% rate.
How To Settle Claims In Case Of Total Loss?
Here’re the steps that you can follow to claim your car insurance policy in case of a total loss.
- Notify your insurance provider about the damage to your car as early as possible.
- Collect the information asked by an insurance company and submit it to them.
- The adjuster will evaluate the car's damages and decide whether to allow a repair or label it a total loss.
- The adjuster will ascertain the total loss car's actual cash value once it has been declared a total loss on the insured vehicle.
- The insured will reimburse the car's ascertained cash value.
Conclusion
Total loss in car insurance is an unexpected whammy situation, therefore you should always be prepared to bear the loss of your vehicle in such circumstances. Simply, you can purchase the return on invoice cover add-on to strengthen the benefits of your existing car insurance plan. It bridges the gap between the IDV and the total price ensuring that the policyholder gets full compensation for the value of the car and not just the depreciated IDV.
Also Read:
What Are The Factors To Be Considered While Purchasing Car Insurance
What Are The Various Types Of Car Insurance Policy Available In India?
