Total Loss in Car Insurance

Total loss in car insurance is a scenario where the car suffers damage to an extent where it cannot be repaired or the repair expenses are higher than its insured declared value. A car can be declared as a total loss in the following situations:

Total Loss of the Car Due to an Accident: If your cat meets with a severe accident and gets severely damaged, it may be declared as a total loss if it cannot be repaired or is declared unsafe to use.

Total Loss of Car Due to Theft: If your car gets stolen and is not traceable, it will be declared as a total loss.

Whether your car is declared a total loss due to accident or theft, TATA AIG undertakes to pay you the insured declared value of the car after subtracting the deductible amounts based on the terms and conditions of the policy.

Another term used for total loss is “totalled.” It refers to a situation where the total repair cost exceeds its actual value/price. They also refer to this as a total loss of the vehicle in insurance.

At times, you may get confused between the various insurance jargon as they may sound similar. Total loss and constructive total loss are two such terms that often get misunderstood. Here are the key differences between the two terms.

Also Read: Constructive Total Loss in Car Insurance

As mentioned earlier, the compensation for insurance in case of total loss is based on the insured declared value of the car. Thus, it is crucial to understand IDV, its importance and calculation.

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

It is calculated based on your car's age. As your car gets older, its market value will decrease, which further reduces the IDV. So, the total sum assured IDV amount you can receive decreases every year. This can be seen when you renew your car insurance every year.

Also Read: [IDV in Car Insurance]

How is IDV Calculated?

IDV is calculated by taking into consideration a few important factors, such as the selling price listed by the manufacturer based on the model and variant of the vehicle after adjusting the depreciation amount based on the car’s age.

When your car gets older, it depreciates in value based on the extent of usage and wear and tear. So, while calculating the IDV, the rate of depreciation is considered to determine the sum assured. Shown below is the rate of applicable depreciation against the vehicle's age:

Since the car insurance claim total loss is dependent on the IDV of the vehicle, it is crucial that you choose the IDV carefully. Understating the IDV can lead to loss at the time of total loss claim. Similarly, you must not overstate the IDV as it leads to a higher premium.

Make, Model and Variant of the Car: An expensive car with advanced features will have a higher IDV than a basic car model.

Geographic Location: Cars registered in a metropolitan city will have an IDV different from cars present in small towns and rural areas.

Vehicle Type: Whether the car is a private, commercial or company-owned vehicle will affect its IDV value.

Age of the Car: Your car’s age is a crucial determinant of its IDV. As the car becomes older, its market value decreases. Thus, the IDV for new cars is higher and for older cars, it is lesser.

Depreciation: The car’s IDV is also dependent on the depreciation value. Older cars have more depreciation and lesser IDV and vice versa.

Car Accessories: Car accessories are also taken into consideration while calculating the IDV. The valuation of car accessories is also based on depreciation. Thus, the IDV will change depending on the value and working condition of the accessories.

Let us consider an example to understand how the total loss compensation works:

A car meets with an accident and gets severely damaged. Here are the details:

• Invoice value: ₹11,00,000

• IDV of the car: ₹8,00,000

• Policy Type: Comprehensive without any rider/add-on

The calculation car insurance claim settlement will be as follows:

The insurer will pay the vehicle owner the ODV of the car, which is ₹ 8,00,000.

The car owner has to bear the depreciation loss, which is the difference between the IDV and the invoice value.

As the vehicle ages, its depreciation increases and the IDV decreases. Thus, the compensation that you are eligible to receive under total loss insurance coverage also decreases, leading to a loss for you.

If you own an expensive or luxury car, this could mean a significantly lower payout compared to the actual price you bought your car for. To avoid this, we recommended getting a total loss cover in car insurance, also called the Return to Invoice add-on when buying comprehensive car insurance from TATA AIG. This add-on will reimburse you the total invoice amount of your vehicle for a total loss in car insurance.

Let us assess the above total loss example with a return to invoice cover.

A car meets with an accident and gets severely damaged. Here are the details.

• Invoice Value: ₹12,00,000

• IDV of the car: ₹8,00,000

• Policy Type: Comprehensive

• Policy Add-On: Return to Invoice Cover

Depreciation amount at the time of accident: None due to RTI Cover

Since the insured has purchased an RTI cover for his car insurance plan, he will get the full payment of the car’s invoice value without any depreciation loss, which is ₹12,00,000.

Saves You from Financial Loss: Having an RTI cover with your car insurance saves you from bearing the depreciation loss at the time of claim settlement as we pay you the full invoice value.

Increases the Scope of Insurance Coverage: Return-to-invoice cover increases the scope of your car insurance, allowing you to customise the insurance plan as per your needs.

Beneficial in Case of Theft/Accident: It is especially useful if your car gets stolen and is declared untraceable or if it meets with a severe accident and is completely damaged. The RTI cover will provide you with compensation equal to the car’s invoice value and save you from incurring a loss.

Beneficial for New Cars: New car owners must include this add-on cover in their insurance policy. In case your new car meets with an accident or gets stolen, the add-on will prove to be beneficial as it will compensate you adequately.

Beneficial for Those Living in Disaster-Prone Areas: Those staying in flood-prone areas or natural disaster-inclined areas must also consider this cover while purchasing or renewing car insurance. If, due to any natural calamity, the car gets damaged, they can claim full compensation.

Pays for All the Expenses Incurred for Car Purchase: With the RTI add-on cover, you also get the car’s invoice price as the settlement amount. Thus, it covers the registration, taxes and other expenses that you incur when purchasing the car.

At TATA AIG, we consider the impact of financial loss on your family and ensure swift total loss insurance claim settlements. With a high claim settlement ratio, we ensure you get the most appropriate compensation for your vehicle.

Also Read: What is Return To Invoice Cover in Car Insurance?

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.

If your car is severely damaged in an accident or is stolen, you must follow the steps given below to raise a claim successfully.

Step 1: Inform TATA AIG as soon as possible about the incident or theft.

Step 2: Convey all the information as required, such as the nature of the incident, date and day, etc.

Step 3: A surveyor will be appointed and sent to assess the vehicle and determine if the car is a total loss.

Step 4: After the assessment, the car will be declared a total loss or eligible for damage repairs.

Step 5: Once the car is declared a total loss, you must submit the documents as required and file for a claim.

Step 6: TATA AIG will determine the car’s value and you will be paid compensation as per the policy terms.

• Insurance claim form (Fill it out accurately)

• Surveyor’s report stating the total loss

• Copy of FIR (in case of theft)

• Copy of driving licence

• Copy of TATA AIG insurance policy

• Coy of car registration certificate

• Other documents, as required for your specific case

A total car loss can be a disappointing situation for any car owner and a rejected insurance claim only adds to the financial strain. To avoid landing in a claim rejection situation in case of total loss, here are some important tips.

• Renew your policy on time, as an insurance company will not accept a total loss claim on a lapsed policy.

• Disclose all the essential information about the vehicle to the insurer while filing the claim, such as car modification, etc., to file a claim successfully.

• Report the incident that caused total damage to your car to the TATA AIGs team as soon as possible. Late reporting may be a reason your claim is rejected.

• Avoid filing any fraudulent claim or misguiding the insurance company, as it can lead to policy cancellation.

• Do not drive in an intoxicated state, as the insurance company will reject your claim outright.

Car insurance is the first step towards ensuring financial safety as a car owner. It can help you recover from a major financial setback in case of a total loss of the car. Moreover, opting for a return to invoice add-on when you buy car insurance can be beneficial as well.

However, an RTI cover can be added only if you have a comprehensive or own damage four-wheeler insurance policy.

At TATA AIG, we offer affordable, comprehensive car insurance with add-on covers, including RTI, to ensure you get the maximum benefit in case of a total loss. Our comprehensive insurance plans offer own damage plus third-party liability cover to give you extensive coverage under all circumstances.

You can purchase our car insurance starting at ₹2094 in a few easy steps and save up to 75% on premiums when you make an online purchase. We offer a high claim ratio and an efficient team to guide you through emergencies.

Get your car insurance now for a peaceful driving experience!