Much like you wouldn’t want yourself to be indulged in an accident; similarly, you would never want your vehicle to be indulged in an accident. And that is the reason why you purchase the best available car insurance. While insurance might be useful in compensating for any potential damage that your vehicle would undergo, sometimes the damage is too huge to actually repair. This is where the concept of total loss comes in. So here’s everything you need to know about it.
The Basics
Before we begin to explain what total loss in terms of car insurance is, it is important to be familiar with the concept of IDV or Insurance Declared Value. In simple terms, IDV refers to a sum that reflects the agreed-upon market price of the car at the time of insurance renewal/purchase. This amount is less than the ex-showroom price for the vehicle. As the years’ pass, this amount usually depreciates, representing the current market price of the vehicle. It is also the maximum amount you can claim from your insurer. More than just being a number that represents the market value of the vehicle, IDV plays an important role in determining whether or not a case is considered to be a total loss.
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Total Loss/Total Constructive Loss
While accidents are usually compensated by comprehensive insurance, there can still be unfortunate situations where the damage to your vehicle is so much that it really is beyond repair. A total/constructive total loss situation, therefore, occurs when the cost of repairing your vehicle exceeds 75% of your vehicle’s insurance declared value. Much like a total loss, a total constructive loss occurs when the cost of repair exceeds 100% of your vehicle’s IDV/Market value.
Also, Read 15 Popular Car Insurance Terminologies That You Should Know!
When can a total loss occur?
For a total/constructive total loss to occur, any one of the two below mentioned situations should generally happen:
- Theft: A total loss may occur when your vehicle is stolen, and cannot be recovered by any means
- Damage: If your vehicle suffers damage to such an extent that the repair would entail more than 75 or 100% of your vehicle’s IDV.
What to do in case of a total loss?
If you have suffered a total loss, the first thing to do is to file a claim. When you do so, your insurance company will assess the cost of repair, and if your vehicle is found to be a total loss, then your insurance company would straight up pay you the insurance declared value. In case of theft as well the IDV will be paid by the insurance company.
Check out: Reasons To Partner With GoMechanic For Insurance Claims!
What else can you do?
In an unfortunate case of a total loss, the only amount you will be able to recover would be the insurance declared value of your vehicle, which depreciates each passing year. Thus a smarter move would be to purchase a “Return to Invoice Cover”, which is a car insurance add-on that can be availed for at an additional premium. The purpose of this add-on comes into play in case of your vehicle gets damaged beyond repair. With a return to invoice cover, the insurer will not only be compensated with the IDV but also be compensated for the total price of the vehicle at the time of purchase, thereby eliminating the depreciated value compensation.
So this was all about your vehicle’s total loss with reference to vehicle insurance. Stay pinned to the GoMechanic blog for everything automotive.
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