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Know About Total Loss Car Insurance Claim Process in India


Written by Saad Ahmad

Updated Oct 18, 2023

"Total loss" in car insurance is one such word that might be perplexing. Let's learn everything there is to know about this phrase.

In the midst of the distress and chaos following a severe car accident, dealing with insurance claims can feel overwhelming. One term that often surfaces in these scenarios is ‘total loss’, a crucial concept in car insurance that every policyholder should understand. In this guide, we will demystify the total loss car insurance claim, helping you navigate through the process with ease and confidence in the unfortunate event of substantial vehicle damage.

What is Total Loss?

Total loss in car insurance refers to a situation where the damage to the vehicle is so extensive that the cost of repair approaches or exceeds its insured value. This concept is crucial for policyholders to grasp, as it directly impacts the claim amount you might receive from the insurance company. Total loss can be categorised into two types:

1. Constructive Total Loss:

In cases of Constructive Total Loss (CTL), the car isn’t damaged beyond repair. However, the cost of retrieval and restoration is almost the same as its current value. Essentially, if the repair expenses surpass 75% of the vehicle’s insured value, it's deemed a constructive total loss. Under CTL, insurance companies find it economically unfeasible to repair the vehicle, opting instead to settle the claim by paying the insured the car's current market or agreed value.

2. Absolute Total Loss:

Absolute Total Loss refers to situations where the vehicle is irreparably damaged or completely destroyed, making it impossible to restore to a roadworthy condition. Such damage could occur in catastrophic events like a severe accident, fire, or natural disaster. In such cases, the insurance company compensates the policyholder based on the car’s market value at the time of loss.

Understanding the differences between Constructive and Absolute Total Loss is pivotal as it helps in setting the right expectations regarding the total loss car insurance claim amount and the ensuing process.

What is Constructive Total Loss in Car Insurance?

Constructive Total Loss (CTL) is an important term in car insurance as it affects how much is paid out in claims. It describes circumstances in which the car is not irreparably damaged, but the cost of fixing it is out of proportion to its present market value.

For instance, let’s say your vehicle's repair cost is estimated at ₹1.5 lakhs and its market value is ₹2 lakhs, the insurance company may declare it a constructive total loss because the repair expenses are approximately 75% of the vehicle’s value.

Key Points about CTL:

1. Calculation: The calculation for CTL considers the repair costs and the salvage value of the vehicle, which is its estimated worth post-repair. If these combined costs are near or exceed the car’s pre-accident market value, it's deemed a constructive total loss.

2. Claim Amount: In CTL cases, the claim amount provided to the policyholder is the car’s Insured Declared Value (IDV), which is essentially its current market value. The IDV is stipulated in your policy document and decreases with the vehicle’s age due to depreciation.

3. Salvage Title: After a CTL declaration, the damaged vehicle's ownership (or its salvage) often goes to the insurance company. However, the policyholder may have the option to retain it, albeit with a reduced claim settlement.

How is Total Loss Calculated?

When an insurance company receives a claim, it engage in a thorough evaluation to determine whether the vehicle is a total loss. Below are the steps involved in this calculation:

  1. Assessing Repair Costs:

The insurer assesses the extent of damage and estimates the cost of repairs. This includes the price of spare parts, labour, and any other expenses that may be involved in restoring the vehicle to its pre-accident state.

  1. Evaluating Salvage Value:

If the vehicle is repaired, it won't have the same market value as before the accident. The insurer calculates the salvage value, which is the estimated worth of the car after repairs.

  1. Comparing Costs with IDV:

The sum of repair costs and salvage value is compared with the vehicle's Insured Declared Value. If the combined cost is close to or exceeds the IDV, the insurer declares the vehicle a total loss.

  1. Factoring Deductibles:

Deductibles are the amount you agree to pay out-of-pocket for repairs. The insurer will consider deductibles in their calculation, ultimately affecting the claim amount disbursed to the policyholder.

Understanding IDV:

It’s essential for you to understand your vehicle’s IDV as it is the maximum amount you can claim in case of total loss. IDV is the vehicle's current market value, factoring in depreciation. This value decreases over time, affecting the total loss calculation and the claim amount you may receive.

Through understanding the nuances of Constructive Total Loss and the total loss calculation process, you can navigate car insurance claims more efficiently, ensuring you receive fair and timely settlements.

Which Claim Category Does Total Loss/Constructive Total Loss Fall Under?

Total Loss and Constructive Total Loss claims fall under the comprehensive insurance claim category. Comprehensive car insurance is an extensive policy that provides coverage for damages caused due to accidents, theft, natural disasters, fires, and other unforeseen events. 

Below is a further breakdown:

Comprehensive Insurance Claim:

1. Wide-Ranging Coverage: This policy not only covers third-party liabilities but also damages to the policyholder’s vehicle, making it ideal for addressing total loss scenarios.

2. Total Loss Claims: Comprehensive insurance is vital for total loss claims as it covers situations where repair costs are steep or the vehicle is irretrievable.

3. Mandatory for Financing: If your vehicle is financed or leased, the financer usually requires comprehensive coverage to protect their investment in the event of total loss.

Total Loss/Constructive Total Loss Claim Settlement Process

Navigating through a total loss claim settlement can be intricate. Understanding the process can significantly smooth out the experience:

  1. Reporting the Claim:

The first step is to report the claim to your insurance provider, providing all the necessary details about the incident and the damages incurred.

  1. Documentation:

You'll need to submit various documents, including your claim form, vehicle registration details, driving license, FIR (if applicable), and any other documentation your insurer requires.

  1. Vehicle Assessment:

The insurance company will conduct a thorough assessment of the vehicle's damage to determine whether it is a total loss or constructive total loss case. This process involves estimating repair costs and the vehicle’s salvage value.

  1. Claim Approval:

Upon verification of documents and assessment, if the claim is approved, the insurer will communicate the settlement amount based on your policy terms and the vehicle’s Insured Declared Value (IDV).

  1. Disbursement:

Once the claim is approved, the insurance company will disburse the settlement amount. If you have a loan on the vehicle, the payout might be directed to the financer first to settle the outstanding loan amount, with the remainder going to you.

  1. Transfer of Ownership:

In total loss cases, the damaged vehicle (now considered salvage) usually becomes the property of the insurance company. However, you might have an option to retain it, but this could affect the settlement amount.

Which Law Governs Total Loss?

Total loss car insurance settlements in India are primarily governed by the Motor Vehicles Act of 1988 and the guidelines set by the Insurance Regulatory and Development Authority of India (IRDAI). 

Motor Vehicles Act of 1988:

This comprehensive act provides the framework for all matters related to motor vehicles in India, including the rules and regulations pertaining to insurance. It lays down the groundwork defining the rights and liabilities of the insured and insurer, helping in understanding the legal standing of total loss claims.

IRDAI Guidelines:

IRDAI, as the regulatory body, issues guidelines, and norms for insurance companies to ensure fair practices and protect consumers' rights. The organisation sets the standards for claim settlements, including those for total loss and constructive total loss, ensuring that the process is transparent, fair, and as per the regulatory framework. 

Final Thoughts

Dealing with a Total Loss or Constructive Total Loss claim can indeed be a daunting experience, but armed with the right knowledge, you can navigate through the process with much-needed ease and assurance. Understanding the concept of total loss, the law governing it, and the meticulous claim settlement process is imperative for all vehicle owners.


  1. After my car is deemed a total loss, what should I do first?

When your car is deemed a total loss, work closely with your insurance provider, giving them all the information and documents they need right away to speed up the insurance claim for the total loss of the car.

  1. How much is the IDV, or insured declared value?

Your car's current market value, or IDV, is determined by deducting the rate of depreciation from the advertised price of the vehicle. It is the highest amount guaranteed you will be able to get back from the insurance in the event of a complete loss.

  1. What transpires with my car following a declaration of total loss?

Usually, the insurance company acquires ownership of the salvage or damaged car. You may be able to repurchase it at its salvage value, though.

  1. Can I contest the whole loss statement my insurance provider made?

Yes, you have the right to contest the total loss statement if you don't agree with the assessment. Should you choose to contest the insurer's assessment, you may need to present proof, such as repair estimates from reputable technicians.

  1. What Should I Do If the Settlement Amount of a Total Loss Claim Exceeds My Car Loan?

Any remaining debt on your loan that is greater than the amount of the claim settlement will be your responsibility to pay. In order to cover the difference in these circumstances, think about getting gap insurance.

  1. What is the average time frame for resolving a total loss claim?

If you promptly submit all necessary paperwork, the payout process can take anywhere from two to six weeks from the moment you declare the loss. However, this is not always the case.

  1. How is the overall loss claim settlement amount determined?

The Insured Declared Value (IDV) of your car less any deductibles determines the settlement amount. Your car's pre-accident market value is known as the IDV.

  1. Will my insurance payments still need to be paid if my automobile is deemed a total loss?

You can cancel the insurance policy and the insurer will pay any premiums that remain for the life of the policy once the claim is resolved and the vehicle is no longer in your possession.

  1. Should I keep my auto insurance after declaring a total loss?

You may want a new policy to cover the salvage if you decide to keep it. If not, you might think about keeping auto insurance to guard against non-ownership responsibilities if you don't buy a new car right away.

  1. Does an occurrence involving a total loss need to be reported to the regional transport office (RTO)?

Yes, you have a legal duty to notify the local RTO within 14 days of the incidence of your vehicle's total loss. If you don't, there could be legal repercussions.


Written by Saad Ahmad

Saad is a marketing guru and has some exciting knowledge to share about the motor and related industry. Read More


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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