Having a motor insurance policy is extremely crucial. However, buying car insurance without understanding its terms and other aspects may lead to inadequate coverage, unexpected out-of-pocket expenses, or disputes during claim settlement.
One common term used in car insurance is total loss claim. Understanding this term is essential, especially if you get in a situation where your car is severely damaged or lost.
This blog will discuss everything you need to know about total loss claims in car insurance.
What Is a Total Loss Claim?
Technically, a four-wheeler is declared as a total loss when the expense to repair the four-wheeler to its pre-damaged condition surpasses its current market value. An essential thing to note is that a total loss can occur in two scenarios – a vehicle accident where the vehicle is damaged to such an extent that it cannot be used anymore or in case of vehicle theft.
Having appropriate commercial vehicle insurance is even more critical to ensure you are adequately covered for losses.
What Is Constructive Total Loss In Insurance Claim?
A constructive total loss in car insurance means that the four-wheeler has suffered extensive damage. The repair expenses might exceed the four-wheeler’s IDV (Insured Declared Value). This type of loss is usually incurred if the four-wheeler suffers a total wreck or a head-on collision.
Total loss in four-wheeler insurance accounts when the repairing expense exceeds 75% of the four-wheeler’s market value or insured declared value. Meanwhile, in case of a total constructive loss, the repair expense for damages that occurred might exceed 100% of the four-wheeler’s IDV. Sometimes, this value might exceed the coverage limit of the insurance policy as well.
Motor Vehicle Act Rule For Constructive Total Loss Insurance Claim
If the four-wheeler falls under constructive total loss and suffers damages beyond repair, then you must report the loss at RTO. As per the Motor Vehicles Act of 1988, you are required to report the total loss of the four-wheeler within 14 days from the date of the incident. Following this, the RTO will proceed to cancel the car registration.
How Is Total Loss Value In Car Insurance Calculated?
The total loss car insurance settlement amount is calculated equal to the Insured Declared Value. This value is calculated as the following:
| Age Of The Car | Depreciation Rate for Calculating IDV |
| Below 6 months | Nil |
| 6 months to 1 year | 5% |
| 1 year to 2 years | 10% |
| 2 years to 3 years | 15% |
| 3 years to 4 years | 25% |
| 4 years to 5 years | 35% |
| 5 years to 10 years | 40% |
| Exceeding 10 years | 50% |
Total Loss Settlement Process In Car Insurance
Follow the below process for total loss car insurance settlement-
- Inform your insurance provider as soon as your four-wheeler gets damaged.
- Provide all requested details sent by your insurance provider to the adjuster.
- The adjuster will estimate the damages to your four-wheeler and either agree to repair it or declare it a total loss.
- Once the insured four-wheeler has been declared a total loss, the adjuster will evaluate the actual cash value.
- The insurance provider will pay the actual cash value of your four-wheeler.
Read more: 5 Things to Know Before You File Your Car Insurance Claim
To Wrap It Up
Now that you know the importance of a total loss insurance claim, ensure that your car insurance policy covers the total loss or damage to the vehicle. This will ensure peace of mind while driving your four-wheeler.
