How to Claim Total Loss Benefits on Your Car Insurance?
For the insurance company's compensation, a vehicle is deemed a total loss if the repair cost is more than 75 percent of its Insured Declared Value (IDV). The policyholder will be compensated for the car's IDV irrespective of a total loss. Based on the car's age, the IDV depreciates over time.
IDV is a vehicle's Insured Declared Value, which is the negotiated market price of the vehicle and is cheaper than the ex-showroom price. Over time, it gradually decreases and reflects a car's actual selling price. No matter how old the vehicle is, you will not receive the car's replacement cost. Therefore, the maximum payout you receive in the event of total loss is equal to the vehicle IDV as stated in the policy year the accident occurred.
Determining Total Loss of the Car
- When a claim against a damaged vehicle is submitted to the insurance provider, they determine if the car needs to be repaired or ‘declared as a total loss’.
- When the repairing cost of the vehicle to its pre-damaged condition is more than the cost of the car's present value, the car insurance provider declares the car as 'total loss.
- The estimation of the total loss value depends on multiple considerations
Car Insurance Claim Settlement In case of Total Loss
Where there is a total loss of your car, it implies the total cost of the vehicle's repair and recovery exceeds 75% of the vehicle's IDV. In such a scenario, the insurance provider shall refund the vehicle's existing IDV minus the balance of the "compulsory excess". The car owner must shift the vehicle salvage to the preferred premises of the insurer and then transfer the damaged vehicle's ownership to the insurer. The insurance provider will direct the policyholder to get the cancellation of the vehicle's registration from the RTO.
Calculation of IDV
Insured Declared Value (IDV) = Manufacturer's listed selling price + Accessories’ total value – Depreciation that is applicable based on the vehicle’s age
The Rate of Depreciation for Different Parts of the Car for Insurance Claim
|
Parts |
Depreciation |
|
Paintwork |
50%, where a combined amount is charged for painting, the depreciation is 25% of the total cost |
|
Tyres, airbags, nylon, plastics parts, tubes, batteries |
50% |
|
Glass components |
No depreciation |
|
Fiberglass components |
30% |
Based on Age of the Vehicle, Depreciation for Calculating IDV
|
Age of the Vehicle |
Depreciation |
|
New Vehicle |
5% |
|
<6 months |
5% |
|
6months-1year |
15% |
|
1-2 years |
20% |
|
2-3 years |
30% |
|
3-4 years |
40% |
|
4-5 years |
50% |
|
>5 years |
50% |
The sum to be covered for the car is decided after an assessment where the car's age is above 5 years. An authorised car dealer/surveyor/used car dealer should make this assessment.
Return to Invoice Cover
It is an add-on that can be bought at an extra premium. It means that in the event of theft/total loss, the purchaser is not paid for the car's IDV, but the car's total price when purchasing. Thus, the policyholder receives full compensation for the car value and not the IDV, but also for the value of the vehicle.
Must Check
Car Insurance Claim Settlement
Bottom Line
The insurance provider shall not be liable to compensate any amount exceeding the IDV on a car. The same law would apply in the event of a total loss of the vehicle. Your car insurance policy may not fully replace your damaged car; however, it can certainly help you minimise losses. With the compensation received, you can put in an additional amount and get a new car for yourself.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
