# When do insurance companies declare total loss claim of the vehicle

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## 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.

After a claim for total loss is paid, the car insurance policy is terminated.

## 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.

## 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.

Choose wisely!

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Mar 17, 2021
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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.

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