What Does Total Loss Auto Insurance Entail?
Total loss auto insurance or total loss coverage is a part of comprehensive car insurance that gives you coverage in case your car is damaged beyond repair. Total loss coverage falls under the category of an Own Damage plan, which is a part of the comprehensive car insurance plan.
When your car is considered as a Total Loss, it means the cost of its repair exceeds the actual market value of the car. The insured can claim a total loss in this scenario. In cases of theft where the car is not traceable, the policyholder can claim total loss coverage.
Read on to find out more about car total loss in insurance.
What is Total Loss in Car Insurance
As per the car insurance regulatory norms in India, a car is considered a Total Loss, if the cost of the damage repair is more than 75% of the IDV (Insured Declared Value). In this case, the car insurance company pays an amount that is equivalent to the IDV after deducting the compulsory amount of repair.
The Total Loss can happen due to two reasons. Total loss due to damage by an accident or total loss because of theft. Buying a comprehensive car insurance policy with total loss coverage will help you get the best value for your car in case of a total loss.
How to Calculate IDV in Car Insurance?
As per the Indian Motor Traffic Act, the process of calculating the IDV is uniform across all insurance providers. They all follow a transparent method for calculating IDV by considering the standard depreciation rates.
You can calculate the IDV of your car by including the total value of all accessories of the car along with its selling price as listed by the vehicle manufacturer. Then, you will need to deduct the total depreciation from this amount that is levied on this vehicle based on its age.
Here is a list of depreciation that is applicable for a car as per their age. You can calculate the IDV of your vehicle based on the following depreciation rate.
| Age of the Vehicle | Applicable Depreciation Rate |
| Newly Purchased Car | 5% |
| Below 6 months | 5% |
| 6 months to 1 year | 15% |
| 1 year to 2 years | 20% |
| 2 years to 3 years | 30% |
| 3 years to 4 years | 40% |
| 4 years to 5 years | 50% |
| Above 5 years | Mutually decided by the insurer and insured |
What are the Factors that Affect the IDV of Your Car?
Insured Declared Value (IDV) determines the current market value of your car. As per total loss insurance, the insurance company settles this amount in case of a total loss of your vehicle.
However, there are certain factors that affect the IDV of your car. Let us explore some of these factors before buying a car insurance policy.
- Age of the car
- Current mileage of the car
- Car make, model, and variant
- Registration date of the car
- The structural condition of the car
- The mechanical condition of the car
- Engine capacity of the car
- The ex-showroom price of the car
- Type of vehicle – private, commercial or company-owned
How to Get The Full Value of a Car at The Event of Total Loss?
If you have total loss car insurance, you will get compensation for the total loss of your car based on a pre-decided IDV value. However, as your car ages, the Insured Declared Value keeps on reducing as the car’s value decreases with time.
This means the IDV will be higher for a new car, and its value will decrease with each passing year. If you want to get the full replacement cost of your car in the event of a total loss, you may opt for Return-to-Invoice add-on insurance coverage.
This add-on cover will allow you to get the invoice value of your car. This amount includes the vehicle registration charges and applicable taxes in case of total damage or theft of your car. This add-on cover allows you to get the on-road price for your car that you had paid at the beginning.
Please Note: In order to get the full value of your car, you need to buy the Return-to-Invoice add-on cover at the time of buying the insurance policy or during your plan renewal, not after your car is stolen or damaged.
Conclusion
Choosing car total loss insurance is a smart decision as it helps you get compensation in case your car is stolen or damaged beyond repair. Knowing the nitty-gritty of comprehensive car insurance with total loss coverage also helps you prepare yourself in case of an accident in which the car is damaged fully or stolen.
Remember to buy the necessary insurance cover for your vehicle right after you buy your car from reputed providers like Tata AIG. Also, renew your car insurance plan within the validity so that it does not get lapsed.
You must know that unforeseen situations like accidents and theft may happen at any time, and having valid insurance coverage is necessary to get the desired compensation.
