While insurance can seem quite complex due to all the technical terms and jargon, it is an undeniable fact that it can be very useful in times of need. During an accident or theft, insurance can provide financial support to compensate for the loss incurred. Mostly insurance helps cover repair costs but, what happens when there is a total loss of the vehicle? Insurance can be a saviour then. Read further to understand how insurance can help during total damage of a car
Total Loss of the Car
The total loss in car insurance is declared when the vehicle is damaged to such an extent that the cost of repair is higher than the car’s total Insured Declared Value. If the repair cost exceeds 75% of the car’s IDV, the total loss of the vehicle is declared. In such situations, the insurance company reimburses the existing vehicle’s IDV after deducting the compulsory excess amount. Total loss can take place under the following two circumstances:
Total Loss by Accident – The car is damaged beyond repair in an accident and cannot be used any longer
Total Loss by Theft – The car is stolen and cannot be traced by the police
Constructive Total Loss
The term ‘constructive total loss’ refers to when the car is so damaged that it is cheaper and smarter to buy a new vehicle instead. Under Section 55 of the Motor Vehicle’s Act, 1988, if a vehicle is destroyed beyond repair and comes across the situation of a constructive total loss, the owner of the vehicle/policyholder is required to inform their Registered Transport Office within 14 days from the date of the accident or theft. It is important to intimate them about the total loss and cancel the registration of the vehicle
What is IDV?
IDV refers to the Insured Declared Value of a car, which is the agreed market price of the car and is less than the ex-showroom price. The value of the car is important in determining the insurance premium and claim amount. In case of total damage to the car or theft, it is this amount that will be provided to the policyholder as compensation
How is IDV Calculated?
Insured Declared Value (IDV) = Manufacturer’s selling price of the vehicle + Total value of accessories – Depreciation applicable based on the age of the vehicle
Return to Invoice Cover
This cover can be bought by paying an additional premium. This helps enhance the policy and in case of a total loss, can be very useful. This policy ensures that the policyholder is not just compensated with the IDV amount but, with the total price of the car invoice at the time of purchase. This helps bridge the gap between the IDV and the total price of the car
The total loss thus refers to the cost of repairing a car that exceeds 75% of the IDV of the car. Choosing the right additional riders like Return to Invoice cover can be useful to protect one from liabilities of total damage and will ensure that the policyholder is compensated for the loss. To know more about car insurance policies available in the market, click here!