Motor Insurance: In order to stop misuse of documents related to total accident loss or stolen vehicle, the insurance regulator has asked insurance companies to ensure cancellation of the Certificate of Registration (RC) of the vehicle in case of total loss claim settlement.

Insurance Regulatory and Development Authority of India (IRDAI) has said that in case of total loss (TL) of the vehicle, salvage of the vehicle is being sold to scrap dealers across the country without cancelling RC of the vehicle. Even the law enforcement authorities have highlighted that documents pertaining to such vehicles are being misused like giving new identity to the stolen vehicles by forging engine number and chassis number of destroyed vehicles under TL claims. Therefore, the vehicle owner must ensure that the RC is cancelled so that no one can misuse or commit a crime using the vehicle’s registration details.

Motor Insurance: Total Loss of Vehicle

  • In insurance, a vehicle is certified as a total loss when the cost to repair is more than 75% the insured cost of the vehicle or Insured Declared Value (IDV).
  • Total loss can occur because of an accident or theft.
  • The IDV is the maximum amount that you can claim under a car insurance policy to compensate for any loss arising from theft or accident.
  • It is calculated based on the manufacturer’s selling price of the vehicle plus the value of accessories minus the depreciation based on age of the vehicle.

  • The depreciation rate is 15% for vehicles less than one year; 20% for one to two years; 30% for two to three years; 40% of three to four years and 50% in case of four to five years. After five years, the IDV is determined after an assessment by a surveyor or determined mutually between vehicle owner and insurance company.
  • In case of total loss, the maximum payment the insurance company will give to the policyholder will be the IDV of the vehicle in the policy year. Insurers offer return to invoice, an add-on cover, for cars not older than two years from the date of purchase. In this add-on cover, insurers pay the the difference between the IDV and the invoice in case of a total loss.
  • In case the cost of repairs exceed 100% of its IDV, then it is termed as constructive total loss. Insurers treat such a claim as a total loss and the policyholder will get the current IDV of the vehicle as reimbursement from the insurance company.

Motor Insurance: Things to do in Total Loss

  • If a motor vehicle has been destroyed or has been rendered permanently incapable of use, the owner will have to report within 14 days to the registering authority within whose jurisdiction he has the residence or place of business where the vehicle is normally kept.
  • The registering authority will cancel the registration and the certificate of registration, and will forward the report and the certificate of registration to the original registering authority and that authority shall cancel the registration.
  • The cancellation of RC is a legal process where vehicle is considered scrapped and the particular vehicle will no longer be in existence or registered to anyone. It will be done by the State RTO and rules and fee svary from state to state.
  • When the RC cancellation is complete after clearance from the police department, the State RTO informs the vehicle owner and issues a non-utilisation certificate within four to five weeks.