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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.
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.
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.
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.
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