What Is Total Loss In Car Insurance?

Total loss in a car insurance claim is ascertained when the repair costs for the damage exceed 75% of the Insured Declared Value. Your insurer declares total loss after assessing the vehicle conditions. It is prevalent in the following two situations:

1.Total loss of car due to an accident - Consider the scenario wherein you meet with an unexpected accident and the vehicle gets damaged completely. In such a case, if the damage is beyond recovery and you cannot utilise it anymore, you can file a claim on your total loss insurance.

2.Total loss of car due to theft - If your car gets stolen and is not traceable, you can benefit from the total loss insurance claim.

In such scenarios, the insurers offer the IDV of the vehicle based on the defined terms and conditions as per your car insurance policy.

Total loss is often confused with the constructive loss of a vehicle. Constructive loss is a condition referred to when your car suffered damages that are not recoverable to the actual condition prevalent before the accident even after repair. On the other hand, a total loss is ascertained when a repair is possible and it exceeds 75% of the IDV. In either case, your insurer will compensate for the losses after their assessment.

IDV refers to the Insured Declared Value of your car. It is the sum assured and the maximum amount you can receive from the insurance provider in total loss or theft. It is determined by the prevailing market value of the car. On the renewal of car insurance, you can see the value of IDV change every year.

The IDV is calculated based on the age of your car and determines the total loss insurance value. With the increase in the age of your car, the market value decreases, which further reduces the IDV. Therefore, the total loss insurance sum assured on your four wheelers insurance policy also gets lower.

As the IDV is based on the market value of your car, it is determined by considering the depreciation value.

When your car gets older, it depreciates in value based on the extent of usage, wear and tear. So, while calculating the IDV, the rate of depreciation is considered while determining the sum assured. Here is a detail of the depreciation rate based on the age of your car:

So, as you can see, the depreciation rate is 5% for the first six months, and it increases going further every year. And as the car reaches five years old, the depreciation rate becomes 50% and continues to remain the same after that. If the car is much older than 5 years, the insurance provider and the car owner decide the amount for the total loss car insurance in India

Apart from the depreciation rate, certain other factors also affect the IDV.

1.Make and model of car- An expensive car with advanced features will have a higher IDV than a basic model car.
2.Geographic location- Cars registered in a metropolitan city will have an IDV different from cars present in small towns or villages.

There are different types of add-on features available with a car insurance policy. The Return To Invoice is one such cover that is extremely useful during the total loss of your car.

When you proceed with a claim for total loss of your car due to theft or accident, this add-on can cover the difference amount due to the depreciation rate between the purchase value and the compensation offered by the insurer. In addition, if there is a brand new car with the same make and model, insurers will compensate the difference between the amount claimed and the car's new price. Moreover, the return to invoice option will also pay for the road tax and registration cost that you have paid for the car.

At Tata AIG, we consider the impact of financial loss on your family and initiate swift total loss insurance claim settlements. As a result, we have achieved a 98% claim settlement ratio in the FY 2020-2021.

The sum assured in a claim is based on the car insurance policy and the premium you can afford to pay. The premium will be based on the make and model of your car, engine cubic capacity, age of the car, IDV, add-on covers, etc. Therefore, if you prefer to opt for the return to invoice add-on, the premium will certainly increase.

You can calculate car insurance premium by entering the car registration number, some basic personal details, etc., providing the required add-on covers and getting the premium cost by using the online calculator.

Car insurance is the first step towards providing the right layer of protection to your car. It can help you recover from any financial loss to manage the performance of your vehicle. When you opt for online car insurance, you can navigate the different add-on covers, features and benefits to compare the policies available to make a smart investment decision.

However, during an unexpected accident, the damage and the repair cost may exceed the market value of your car. In such cases, insurers will compensate for the loss after inspecting your vehicle's condition.

Such compensation on total loss can be rewarding, especially if you purchase a brand new expensive car. So, if you have suffered total loss by any chance, do not let yourself down when you have the right car insurance in place!