scorecardresearchTotal loss: How to claim car insurance after an untoward accident?

Total loss: How to claim car insurance after an untoward accident?

Updated: 22 Sep 2022, 01:25 PM IST
TL;DR.
Total loss refers to a situation in which a vehicle has sustained damage to the extent that repairing it would cost more than 75% of the car's IDV. Continue reading to know more about total loss, IDV and its calculation in detail.
Total loss refers to a situation in which a vehicle has sustained damage to the extent that repairing it would cost more than 75% of the car's IDV.

Total loss refers to a situation in which a vehicle has sustained damage to the extent that repairing it would cost more than 75% of the car's IDV.

Even veteran drivers of cars occasionally have trouble understanding the jargon of car insurance policies. Unfortunately, most car owners don't realize how ignorant they are about the details of their insurance until they need to file a claim. Therefore, there are a number of phrases you should be aware with before purchasing a car insurance. One of these major terms is total loss.

The phrase "total loss of an automobile" refers to a situation in which a vehicle has sustained damage to the extent that repairing it would cost more than 75% of the car's IDV (Insured Declared Value). In simpler terms an automobile is considered a total loss when it is damaged beyond repairable limits.

Consider that you are currently operating a vehicle with an IDV of Rs. 10 lakh (the IDV of the car keeps going down with every subsequent year). If you have an accident and the garage estimates that the repairs would cost Rs. 8 lakh (80% of IDV), your automobile will be deemed a total loss.

While comprehending the above information, you might get stuck at IDV.

What is insured declared value?

An automobile's Insured Declared Value (IDV) is the agreed-upon market price that is less than the car's ex-showroom price. It displays the automobile's current market value and gets cheaper over time.

Not clear?

In simpler terms, IDV is the maximum compensation your insurance company will provide you in the event that your car is stolen or beyond economical repair. For instance, if you buy a car for 20 lakhs, IDV represents the maximum amount you will get for it.

Now that you understand the concept of total loss and insured declared value, the next important question is about the calculation of IDV.

How do you calculate IDV?

An car is deemed a total loss for the purposes of getting compensation from the insurance company if the cost of restoration exceeds 75% of its IDV. Since the cost of repair vs the IDV of a car determines whether or not the car is a total loss, the calculation of IDV is important to a total loss of an automobile.

Age of the vehicleDeducted value (depreciation)
Less than 6 months5%
6 months to 1 year15%
1-2 years20%
2-3 years30%
3-4 years40%
4-5 years50%
Above 5 yearsMutually decided by insurer and owner

Note: The above data has been taken from Policybazar

In addition to the information in the table above, the make, model, condition, date of registration, mileage, and ownership status of the vehicle all play a significant influence in determining the IDV of the vehicle.

What can you do to protect yourself in such a situation?

A vehicle insurance add-on known as return to invoice coverage can be purchased for a fee to enhance a car insurance policy. Its function is crucial in the case of a total loss. Return to Invoice ensures that the owner is compensated for the full value shown on the car's original purchase invoice, not just the IDV, in the case of theft or total loss.

By filling up the gap between the IDV and the full purchase price, it ensures that the policyholder will be reimbursed for the full value of the automobile and not just the depreciated IDV.

You have the choice to offer the leftover components of your damaged automobile to a scrap dealer. In the event of a total loss, it is crucial for you to revoke the registration certificate. If you do not get your registration canceled, there is a possibility that someone will use your documents for illegal purposes or with malicious intent.

Although no policyholder would want to have their car completely damaged, it is nevertheless crucial to understand the technical aspects of the policy since they would be crucial in the event of a catastrophic accident.

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First Published: 22 Sep 2022, 01:25 PM IST