What is Total Loss in Car Insurance: Meaning and Calculation Explained

Buying a new car is exciting, but getting a car insurance policy can feel daunting, especially if you’re not familiar with certain jargon and technical terms of the insurance; such an important term is Total Loss in Car Insurance, which comes into use when filing a claim for damages. So, let’s understand what Total Loss in Car Insurance is all about.

A total loss in car insurance arises when the car is damaged to such an extent that the cost of repairing it back to a working condition is more than its actual market value/total Insured Declared Value (IDV).

As per the regulatory norms in India, constructive total loss (CTL) of the vehicle where its repair cost exceeds 75% of its Insured Declared Value (IDV).

The situation of a total loss of car insurance can arise due to the following two reasons: 

1. If the car meets with an accident and is damaged beyond repair such that it cannot be used anymore.  

2. If the car is stolen and is not traceable by the authorities.

NOTE: As per Section 55 of the Motor Vehicles Act, 1988, the owner must declare a total loss and cancellation of its registration if the vehicle is damaged to the extent that it cannot be used. The owner needs to report the same to their registered Regional Transport Office (RTO) within 14 days from the date of the accident.

For raising a total loss car insurance claim, reach out to your insurer. They will guide you step-by-step through the entire process. You just need to ensure that you have all the required documents available.

How to Ensure Higher Claim Amount for Your Car in Case of Total Loss Situation?

If your car has suffered a total loss and you want to cover the total replacement cost, and not just the depreciated value, purchase the Return-to-Invoice add-on insurance cover beforehand.

This add-on cover will allow you to receive up to the equivalent of the maximum price mentioned in the invoice of the insured vehicle of the same or near equivalent make, model, features, specifications.  Thus, you will be compensated on the last invoice value of your car.

Also, you will be reimbursed the First-time Registration charges and Road Tax under the new vehicle Insurance Policy of the insured vehicle.

However, remember that you will be eligible to avail of the benefits of Return-to-Invoice cover if you’ve bought it at the time of policy renewal and not after your car’s accident or theft.

When your car is declared a total loss in car insurance, it is horrifying for any policyholder. Knowing about it can easily get you and your vehicle out of the puddle. Make sure you opt for a Return-to-Invoice add-on cover, as being caught in an accident or falling victim to car theft can happen to anybody!