What is Total Loss Car Insurance?
Car Insurance

What is Total Loss Car Insurance?

What is Total Loss Car Insurance?

There are certain jargons and terminologies in car insurance policies that we hear often, but never really care about them until the time we are down to filing a claim for damages. One of these terms is Total Loss insurance. Read on further to know what it is all about.

What is total loss?

First, we need to understand what Total Loss means in terms of car insurance. A damaged car is considered a Total Loss when it is not financially feasible to get it back in a working condition. In other words, if the repair costs exceed the actual market value of the car, it is seen as a Total Loss of the vehicle.

According to regulatory norms in India, a car is termed as a Total Loss if the cost of repairing damages is more than 75% of its Insured Declared Value (IDV).

IDV refers to the current market value of your car and is determined at the beginning of each policy period. It is calculated by adjusting the applicable depreciation from the ex-showroom price of the vehicle at the time of insurance.

Suppose you are driving a car whose IDV at the moment is Rs 5 lakh (the IDV of the car keeps going down with every subsequent year). You meet with an accident and the repair cost of your car is estimated by the garage at Rs 4 lakh (80% of IDV), then your vehicle will be considered as Total Loss.

Even in cases of theft, when your car goes missing, it is considered a total loss.

Total Loss Car Insurance

Total Loss car insurance means that if your car is termed as a Total Loss, then the insurance company will pay you an amount equal to the current IDV of your vehicle.

It is important to highlight here that, unlike what many expect, Total Loss Vehicle Insurance does not pay the actual replacement cost of a new car, but only the current market value of the insured car.

How is IDV calculated?

To keep the process of calculating IDV uniform and transparent, insurance companies need to follow the Indian Motor Tariff Act and take into account the standard depreciation rates mentioned as under:

Age of the VehicleDepreciation Rate for Calculating IDV
Below 6 months5%
6 months to 1 year15%
1 year to 2 years20%
2 years to 3 years30%
3 years to 4 years40%
4 years to 5 years50%

For cars older than 5 years, the IDV is decided mutually between the vehicle owner and insurer every year at the time of policy renewal after an assessment (done by an authorised car dealer or surveyor).

How to get the full value of your car in case of Total Loss?

If you want to ensure that in the event of a Total Loss, you get the full replacement cost of your car and not the depreciated value, then you can buy the Return-to-Invoice add-on insurance cover.

This cover will make you eligible to receive the exact invoice value of your car, including registration charges and all applicable taxes, in case it is stolen or damaged beyond repair. In other words, you get the on-road price of your car that you had originally paid.

Remember that Return-to-Invoice cover has to be bought at the time of policy renewal itself and not after the accident or theft.

Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.

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