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Constructive Total Loss in Motor Insurance

Team AckoAug 18, 2021

Unforeseen accidents may cause damages to your vehicle. Sometimes, these losses may be so severe that the repair costs may be humongous. This may also burn a hole in your pocket.

To secure yourself from such financial implications during any unforeseen accidents, you need to buy Comprehensive Motor Insurance to protect yourself financially.

Constructive Total Loss in Motor Insurance

While the Third-party Liability Plan is mandatory as per the law and provides coverage against third-party liabilities, Comprehensive Car Insurance provides financial protection against damages to your vehicle (in case of accidents, natural/man-made calamities, theft, fire) and comes bundled with the mandatory Third-party Liability Policy.

So, which type of insurance plan covers damages that are beyond repair? Read ahead to learn about the constructive total loss in motor insurance.

What is total loss/constructive total loss in motor insurance?

The insurance company may at its own option repair, reinstate or replace the vehicle or part thereof and/or its accessories or may pay in cash the amount of the loss or damage and the liability of the insurance company shall not exceed:

(a) for total loss/constructive total loss of the vehicle - the Insured’s Declared Value (IDV) of the vehicle (including accessories thereon) as specified in the Schedule less the value of the wreck. 

(b) for partial losses, i.e. losses other than total loss/constructive total loss of the vehicle - actual and reasonable costs of repair and/or replacement of parts lost/damaged subject to depreciation as per limits specified.

If your vehicle is involved in an accident where it was severely damaged, ACKO may decide to declare the vehicle a total loss/constructive total loss in car insurance. The declaration of the vehicle as a total loss/constructive total loss arises when:

  • The damages are beyond economical repair and,

  • The insured vehicle shall be treated as a total loss/constructive total loss if the aggregate cost of retrieval and/or repair of the vehicle, subject to terms and conditions of the policy, exceeds 75% of the IDV of the vehicle.

Here, ACKO will compensate the loss by paying the IDV inclusive of the wreck value of the damaged vehicle after considering mandatory deductibles. A deductible is an amount you have to pay per claim before ACKO pays the rest of the amount.

The IDV payable is inclusive of the insured damaged vehicle wreck value realised in as-is condition, where is condition. i.e Insured will be receiving wreck value amount from the vendor who purchases the damaged vehicle and the balance of the IDV will be settled by ACKO post deduction of deductibles as per policy T&C’s.

In case of total loss/constructive total loss insured has to cancel the Registration Certificate (RC) of the vehicle at the concerned Regional Transport Office (RTO) and produce a cancellation certificate to ACKO for processing and settlement of the claim.

Which claim category does total loss/constructive total loss fall under?

The total loss/constructive total loss is categorised under the Own Damage (OD) claim. Damages or losses incurred due to an accident, natural or man-made disasters, fire or explosion, and total loss are covered under the Own Damage plan. The OD plan is bundled along with the Third-party Liability Plan in the Comprehensive Motor Insurance Policy.

You will be able to raise a claim for damages to your vehicle under Own damage that are beyond repair only if you insure your vehicle with the Comprehensive Plan. You also have the option to include valuable car insurance add-ons with the Comprehensive Plan to extend the coverage.

Total loss/constructive total loss claim settlement process

At ACKO, raising a claim is simple and hassle-free. You can submit your claim through ACKO’s website or the mobile app. Here are the steps to submit your claim.

  • Step 1: Access your account via the mobile app or website (www.acko.com).

  • Step 2: Click on “Claim Now” and answer a few questions about the damages.

  • Step 3: Upload the pictures of the damaged vehicle, and our claims team will guide you through the necessary steps.

An independent surveyor will be assigned to inspect and ascertain the reason and the extent of the loss. The inspection will occur either at the spot of the accident or the garage before it gets repaired or a decision is taken on the declaration of total loss/constructive total loss of your vehicle claim. Based on assessing the state of damages to the vehicle, ACKO may approve or reject the claim.

Here are the main types of vehicle insurance claims.

Third-party Motor Insurance Claim

Suppose a third party is injured or dies in an accident caused by your insured vehicle. Or if in case the insured vehicle damages the third-party property. In both cases, you can raise a claim against the Third-party Liability Plan to compensate the third party through Motor Accident Claims Tribunal (MACT).

Own Damage Motor Insurance Claim

Suppose the insured vehicle is damaged due to an accident, natural calamities (cyclones, floods, earthquakes, etc.), man-made calamities (vandalism, strikes, riots, etc.), fire or explosion, or in case of losses arising due to theft of the insured vehicle or total loss/constructive total loss (damaged beyond economical repair). In that case, you can raise the claim against the Own Damage insurance.

You need to inform ACKO immediately, and in case of theft, you must file an FIR and obtain a court accepted & acknowledged Non-traceable Certificate to complete the process of submitting the claim. While the Own Damage claim covers damages or losses to the insured vehicle, it does not cover third-party claims.

Frequently Asked Questions

Here are some of the commonly asked questions about total loss/constructive total loss.

What happens if my vehicle is totaled?

If your vehicle is damaged beyond economical repair, ACKO will consider the loss as ‘total loss/constructive total loss.’ As for the claim, you will receive the IDV which includes the wreck value of the insured damaged vehicle after considering the deductibles as per policy terms & voluntary deductibles, if any.

What type of damages to my vehicle is considered a total loss/constructive total loss?

In the contract of insurance, the insurer (ACKO) will pay the liability up to the extent of the IDV mentioned in the insurance policy inclusive of the wreck value of the damaged vehicle after deducting the compulsory deductibles and voluntary deductibles (if any). This is except for cases where the policyholder has purchased the Return to Invoice add-on cover (applicable with only Comprehensive Car Policy). 

What compensation will ACKO provide if the damages are repairable but the repair cost is beyond the IDV?

ACKO will decide on the type of settlement post-survey and assessment. Upon confirmation of admissibility of the claim, if in case the damages are repairable but the repair cost is beyond the IDV, it falls under the category of “beyond economical repairs”. Here, the insured vehicle shall be treated as a total loss/constructive total loss if the aggregate cost of retrieval and/or repair of the vehicle, subject to terms and conditions of the policy, exceeds 75% of the IDV of the vehicle. Here, ACKO will compensate the loss by paying the IDV (as per policy) inclusive of the wreck value of the damaged vehicle after considering mandatory deductibles However, ACKO will not pay the repair bill that is more than the IDV of the vehicle.

If the vehicle is stolen, will ACKO declare it a total loss or constructive total loss?

If the vehicle is stolen, the loss has to be intimated to ACKO immediately upon the occurrence of such event. FIR has to be registered in a police station under whose jurisdiction the loss location falls. Upon receipt of claim intimation, ACKO will reach out to you, collect all details and documents related to the event/claim. Later when you receive court accepted and acknowledged and the police issue the Non-traceable Certificate, submit the same to ACKO claims team. This claim is called a total theft claim, and ACKO will pay the IDV stated in the motor insurance policy. However, if you have included the Return to Invoice add-on cover with the Comprehensive Motor Insurance Policy, then you will get the amount as mentioned in the purchase invoice, and the car registration cost and road tax as well.

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