It is not necessary that the car has to be severely damaged to be deemed as a 'total loss'. Even cars having a seemingly minor damage can be declared a total loss.
Total loss is a term common in the automotive industry when a car is deemed unsafe to be driven on roads or safe to drive but beyond economical repair. In case your car is reckoned to be unsafe, then you will receive the amount for the loss rather than getting the repair done. However, when the repair is uneconomical, it will be calculated on a repair to ratio basis, which varies according to different insurance companies and cars.
Insurance companies follow very strict guidelines because it is their responsibility to the return the car in the state it was before the damage. At certain times, it turns out to be an expensive process involving the use of different workshops and parts. After assessing all the factors, the costs for insurance tend to rise. Thus, it is not necessary that the car has to be severely damaged to be deemed as a ‘total loss’. Even cars having a seemingly minor damage can be declared a total loss.
In case your car is new, a single scratch on one side of the car can be declared a total loss by the assessor because the expense of repairing and painting might exceed the vehicle’s actual value even if there is no actual damage on the car’s structure. This is why total loss has been categorized into different types so that people can assess that their damaged car belongs to which category and what steps they should take.
1. Category A: The total loss belonging to this category should be crushed because they are badly damaged and are of scrap value that they should never re-appear on the road. Even the salvageable parts should be destroyed as driving these vehicles may pose a threat to life.
2. Category B: This category signifies extensive damage. The body of the car should be crushed and should never re-appear on the road. However, the salvageable parts can be removed and used on other vehicles.
3. Category C: The car in this category has suffered more than a cosmetic damage and the repair is uneconomical. It might include a crumpled zone, twisted chassis or a bent. However, it can be driven on the road again after being repaired by a professional.
4. Category D: This total loss category is the least severe. The vehicle is not damaged extensively but it is unsafe to drive again unless repaired by a professional as they could affect certain safety features of the car such as brakes or steering. Also, the problem would not be economical to be repaired.
After a car has been declared as a ‘total loss’, the owner has to go through the pain of finding the best deal for the car. The rule for dealing with a total loss car is simple — the insurance company has to pay a proper value for the car. This means that the insurance company has to pay such a value which allows the owner to buy a similar car in the similar condition. The problem arises when the owner and insurer disagree to come at a price for the car’s worth. There are certain instances how a total loss can hamper the owner from getting the car’s insurance:
1. The crafty offer: The owner is offered a payout value that is close enough to the actual value of the car to be realistic, but low enough to save it a few amount of money. Such offers are misleading because this price cannot be expected to be paid realistically.
2. The condition report: The stumbling block in such a situation is the condition of the car. Sometimes the insurer may refuse to believe that the car was in a good shape, or claim that it was more damaged than it actually was.
3. Making the owner pay: If the owner complains enough, the insurance company may slightly increase the settlement, but it will still be way off the amount expected by the owner. So, the insurer may advise the owner to take the help of an independent assessor to find out the value of the car, for a small fee. Usually by this time, the owners are fed up of the situation and they come down to the insurer’s deal in order to avoid added expenses.
4. The valuation of total loss: It is very unlikely that the insurer’s assessment of the car’s market value will be similar to the price the owner paid for it or the owner estimated it when insuring. Usually insurers pay for the market value of the car just before it was total loss, minus the policy excess.
5. Problems in buying back: In some cases the owner may get the benefit of buying back the car after it has been total loss. But the owner has to make the decision at the earliest opportunity. Once a settlement has been figured out, the insurance company takes ownership of the vehicle.
(By Sujay Gupta, CEO, Carlo.in)