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What Is Total Loss All About?

Team AckoJul 22, 2021

Some of us might perceive vehicle insurance as complicated. Mainly due to the fine print that we are always asked to read through or those jargons experts use while telling us about our bike or car insurance. Terms like Depreciation, Insured Declared Value, No Claim Bonus, Total Loss, etc. are fired on us like missiles while buying a simple policy or when we file a claim. If these terms overwhelm you, let us shed some light on one such jargon in this article – Total Loss.

Total Loss in Vehicle Insurance

What Is Total Loss?

Technically, a vehicle is declared as a total loss when the cost to repair the vehicle to its pre-damaged state exceeds the cost of the vehicle’s worth. The first thing to note is, a total loss can occur in two situations – car theft or a car accident where the car is damaged to such an extent that it is not in a usable condition anymore.

Which law governs Total Loss?

The traffic rules that we follow in India are in accordance with The Motor Vehicles (MV) Act, 1988 and the Central Motor Rules, 1989. The section 55 of the MV Act states ‘If a motor vehicle has been destroyed or has been rendered permanently incapable of use, the owner shall, within fourteen days, report the fact to the registering authority.’ In simple terms, after your vehicle is declared a total loss, you need to get in touch with the Regional Transport Office (RTO) within 14 days. Here you need to submit the Registration Card and get the registration of your vehicle canceled.

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How is Total Loss calculated?

A vehicle is termed as a Total Loss only if the cost of repairing damages is more than 75% of the Insured Declared Value (IDV). IDV is the approximate market value of your vehicle. When the cost of repairs exceed 100% of its current market value it is termed as Constructive Total Loss.

In both cases, the car owner will be paid with the amount equal to the IDV. This value is calculated as the following:

Age of the Vehicle Depreciation (reduction in cost) Rate for Calculating IDV
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 between vehicle owner and insurer

For example, if the cost of a 2-year old vehicle was 5 lakh rupees at the time of purchase. In case of total loss, you can claim around 3.5 lakh rupees from your car insurance company.

Total loss is not a pretty situation to be in. But your insurer will certainly do their best to cover you for the loss. So, get your vehicle covered with insurance and save yourself from a complete monetary loss.

Also, read: Vehicle Scrappage Policy in India


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