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What is Total Loss in Car Insurance?
Buying a new car is exciting, but getting a car insurance policy can feel daunting, especially if you’re not familiar with certain jargon and technical terms of the insurance; such an important term is Total Loss in Car Insurance, which comes into use when filing a claim for damages. So, let’s understand what Total Loss in Car Insurance is all about.
What is the Meaning of Total Loss in Car Insurance?
A total loss in car insurance arises when the car is damaged to such an extent that the cost of repairing it back to a working condition is more than its actual market value/total Insured Declared Value (IDV).
As per the regulatory norms in India, a total loss vehicle is the one where its repair cost exceeds 75% of its Insured Declared Value (IDV).
The situation of a total loss of car insurance can arise due to the following two reasons:
- If the car meets with an accident and is damaged beyond repair such that it cannot be used anymore.
- If the car is stolen and is not traceable by the authorities.
NOTE: As per Section 55 of the Motor Vehicles Act, 1988, the owner must declare a total loss and cancellation of its registration if the vehicle is damaged to the extent that it cannot be used. The owner needs to report the same to their registered Regional Transport Office (RTO) within 14 days from the date of the accident.
How to Calculate Total Loss in Car Insurance?
In case of total loss, the policyholder receives the Insured Declared Value (IDV) of the car after deducting the necessary deductible amount. The following are the standard depreciation rates set by the Indian Motor Tariff Act to calculate the IDV.
| Age of the Vehicle | Depreciation Rate for Calculating IDV | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| New Vehicle | 5% | Below 6 months | 5% | 6 months to 1 year | 15% | 1 year to 2 years | 20% | 2 years to 3 years | 30% | 3 years to 4 years | 40% | 4 years to 5 years | 50% | Above 5 years | Decided mutually between the car owner and insurer only after the car assessment is done. |
What is the Claim Process for Total Loss in Car Insurance?
For raising a total loss car insurance claim, reach out to your insurer. They will guide you step-by-step through the entire process. You just need to ensure that you have all the required documents available.
How to Ensure Higher Claim Amount for Your Car in Case of Total Loss Situation?
If your car has suffered a total loss and you want to cover the total replacement cost, and not just the depreciated value, purchase the Return-to-Invoice add-on insurance cover beforehand.
This add-on cover will allow you to receive the exact invoice value of your car, including the road tax, insurance policy cost and registration charges you paid. Thus, you will be compensated based on the last invoice value of your car.
However, remember that you will be eligible to avail of the benefits of Return-to-Invoice cover if you bought it at the time of policy renewal and not after your car’s accident or theft.
When your car is declared a total loss in car insurance, it is horrifying for any policyholder. Knowing about it can easily get you and your vehicle out of the puddle. Make sure you opt for a Return-to-Invoice add-on cover, as being caught in an accident or falling victim to car theft can happen to anybody!
FAQs about Total Loss in Car Insurance
How to calculate total loss in car insurance?
Insurers consider the following factors before determining the total loss insurance value:
- They inspect the car for mechanical and physical damage to decide whether it can be repaired.
- Then, a vehicle's ‘Actual Cash Value’ is evaluated based on the car’s depreciation demand in the area.
What factors affect the car’s Insured Declared Value (IDV)?
Important factors include:
- The car’s age
- Current mileage
- Make, model, and variant type
- Physical and mechanical condition
- Date of registration of the car
- Cubic capacity of the engine
- The car’s ex-showroom price
- Type of car – private, commercial, or company-owned
How can I ensure insurance reimbursement in case my car is stolen and non-traceable?
You can buy Return to Invoice add-on cover if your car is totaled by the insurer in case it is stolen and cannot be found.
What happens when I file for a total loss in insurance claim?
In case of a total loss, your insurance company is liable to pay only the IDV. However, if you have purchased the Return to Invoice add-on cover to your insurance policy then the car insurance company is liable to pay the full amount of the car invoice.