How Does Car Insurance Help if Your Vehicle is Completely Damaged?

Buying car insurance is mandatory as per the Motor Vehicles Act, 1988. Every car owner is mandatorily required to have four wheeler insurance, be it a private vehicle or for commercial use. A car insurance policy helps in a variety of situations like third-party liabilities, natural calamities, man-made events, theft or even fire.

While these are a few events that your insurance policy covers, does your insurer include an event of complete damage? You might be surprised to know that it does. Let us learn more about constructive total loss in four wheeler insurance.

What is a constructive total loss?

In the case of damage incurred by a car where the liability of the insurance company exceeds 75% of the insured declared value (IDV), it is termed as a constructive total loss. Here the cost of repairs is significant. Situations of head-on collisions of cars often result in damage of such severe intensity.

Types of car insurance plans that you can purchase

There are primarily two types of car insurance plans you can purchase – third-party and comprehensive plans. A third-party policy is where the policy coverage includes liabilities to any third person, both in form of injuries as well as property damage. This policy does not cover any own-damages that are faced in an accident by you. Thus, it is also called a liability-only plan. On the other hand, a comprehensive plan provides coverage for own damage including third-party losses. Events like theft, fires, damage due to natural disasters as well as man-made perils are covered under a comprehensive insurance cover. Thus, it is advised to compare car insurance online before selecting a suitable cover for you.

Where does constructive total loss fit in these two types of plans?

A constructive total loss can be claimed for both, third-party as well as comprehensive plans. It is applicable where the insurer’s liability exceeds 75% of the IDV of your car, i.e. the repairs costs are very high. The insurance company sends an insurance surveyor to assess and determine the amount of loss for such an insurance claim.

What happens when an insurance claim is declared as constructive total loss?

When your car is damaged to the point where the repair costs are around 75% of the IDV, then the ownership of the car gets transferred to the insurance company. Here, you will be required to surrender your keys as well as the vehicle-related documents. The insurer compensates you by an amount equivalent to the IDV after deducting the excess expenses. On settlement of the claim, your existing car insurance policy is terminated, and no further premiums are required to be paid.

Is constructive total loss different from total loss?

Total loss is a case where the damage to your car is beyond repair, whereas under constructive total loss, the damage is significant such that the repair costs are equal to or exceed 75% of your car’s IDV. Under total loss, your vehicle cannot be repaired whereas for constructive total loss, it can be repaired at a significant expense. The repair costs under constructive total loss are exorbitant as compared to its IDV.

These are some ways a car insurance policy helps in the event of damage. Remember these terminologies as it helps in selecting new car insurance for your vehicle. Lastly, make the best choice of policy that checks all the right boxes as per your insurance requirements.