When do insurance companies declare total loss claim of the vehicle

What is Total Loss?

A total loss arises when your vehicle is so severely damaged that the claim payable by the insurance company for the cost of repairs is more than 75% of the IDV of the vehicle.

For a claim to qualify as a total loss, some factors need to be considered. These factors are as follows :

The insurer’s liability towards the claim should be more than 75% of the IDV of the vehicle. The insurer’s liability would be computed as follows: Cost of repairs – (depreciation of the parts + compulsory deductible portion + any voluntary excess + cost of repairs not associated with the accident + any other uncovered expenses) This amount represents the claim which the insurance company is supposed to pay. When this claim exceeds 75% of the cost of the IDV, the claim is treated as total loss.

The IDV (Insured Declared Value) of the vehicle in the policy year when the claim is made would be considered.

What is Paid in Case of Total Loss?

If the insurance company considers a claim to be a total loss, the amount payable would be the IDV less the wreck value of the car. The wreck value or the salvage value of the car is the expected amount which can be fetched by selling off the damaged car as scrap.

Can you Avoid Availing a Claim for Total Loss?

Even though the insurance company considers your claim as a total loss and pays off the IDV less the wreck value, you might get your car repaired. You would get the claim from the insurance company after which you can treat your car as per your discretion. You can sell the car as scrap and buy a new car. Alternatively, you can also get your car repaired. However, if you get the car repaired, you would have to obtain a certificate of roadworthiness from the RTO for your repaired car. Moreover, when you buy a fresh motor insurance policy in future for your repaired car, you would have to disclose to the insurance company that your earlier insurance policy had paid a claim for total loss for your car. These two steps are necessary if you continue using your car on which a claim for total loss has been paid.

The final word

A claim for total loss is declared by the insurance company only if its liability towards the car’s repairs is more than 75% of the Insured Declared Value of the car. In case of a total loss, (IDV – the wreck value) is paid to the policyholder.

Let us assume a Person X –

X received Rs.3 lakhs because his IDV in the year of loss was Rs.3.75 lakhs and the scrap value was estimated to be Rs.75, 000. When Mohan understood the meaning of total loss, he decided to buy a new car. He received the claim, sold off the old car as scrap and bought himself a new car. Now you also know what are total loss and the claim you get in case of such loss. So, if God forbid, your car insurance claim is treated as a total loss, understand the concept and know what to expect in claim settlement.

Author Bio

Paybima Team

Paybima is an Indian insurance aggregator on a mission to make insurance simple for people. Paybima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. Paybima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

Choose from India’s top insurers

Other Motor Insurance Products

Latest Post

Taxpayers should know more about Section 139(1) of the Income tax act since it is the section under which they have to file their returns if they have missed filing within the due date.

See nowSee now

Have you ever caught yourself lost in illusions about your daughter's future events, such as her university convocation and first day at work? Her university convocation. When she embarks upon her initial job after graduation will be the day. 

See nowSee now

In a country where medical inflation is rising rapidly, securing a comprehensive health coverage plan for the entire family is no longer optional, it is essential. Selecting the right health insurance requires careful evaluation of multiple factors, not just premium costs. A well-chosen plan ensures financial security, access to quality healthcare, and peace of mind during medical emergencies. 

See nowSee now

Term insurance is an important investment. However, with the availability of so many insurers offering term plans, it becomes difficult to select the best term plan to suit your needs. Buying a term plan needs some consideration and research on the part of the policyholder. In this post, let us discuss the best term insurance providers in India.

See nowSee now

When you sign up for a life insurance policy - whether it’s a traditional term insurance policy or a ULIP – you are not just buying peace of mind. You are also trusting the insurer with your money. So naturally, you would want to know: How is that money being managed? And more importantly, how is it being protected from risky decisions?

See nowSee now