When and How is Your Vehicle Considered a ‘Total Loss’?
Getting involved in a car accident can be disheartening in various manners. Not only you have to go through the physical & mental trauma, but also you have to deal with all the damages done to your car.
If your vehicle has suffered major damage in the event of an accident, what will you do? Do you get all the damages fixed? Or do you buy a new car? It is most likely that your car insurance company will make a wise decision for you. They will finally decide whether your vehicle must be repaired or should be stated as a total loss. Challenging these decisions or determining if they are right will require some sort of familiarity with the insurance claim process on your own part.
In order to have a clear idea, let’s understand under what circumstances is your vehicle declared a total loss? And what exactly happens after that? Here is what that jargon actually means and how it impacts your vehicle in terms of insurance coverage.
What is Total Loss?
Technically, a car is stated as a ‘Total Loss’ by the auto insurance company when the repairing cost of the vehicle to pre-damaged condition surpasses some specific percentage of the car’s value. However, this percentage differs depending on the car insurance company. Few of the auto insurance companies will declare your vehicle a total loss if the damages surpass 80 percent of its pre-accidental value whereas some vehicle insurance providers in the UAE set this bar at 50 percent.
How Is It Calculated?
Evaluating the total loss & the actual value of your car is basically depends on plenty of factors. Here is how the process actually works:
- A vehicle insurance company appoints an adjuster who inspects all the physical as well as the mechanical condition of your vehicle. After that, he/she finally determines whether your vehicle should be repaired and the costs involved in this procedure.
- After doing the inspection successfully, the actual cash value of your vehicle is evaluated by keeping the following factors in mind:
- Depreciation value
- Manufacturing year
- Make & Model
- Wear & Tear
- Demand for the car
- The value assessed is the assumed market value of the vehicle in its pre-accidental state. And if the extent of damage exceeds 50 percent (in the majority of the cases), then your car will be declared as a total loss by the auto insurance company.
Since the actual cash value is based on several factors, this simply means that the extent of damage that combines total loss for one case may not be similar for another car. For instance, a vehicle insurance provider may declare a 15 year old car a scrap even though it has suffered minor damage. You know, why? Since the actual cash value of that car may already be low and the repairing cost will be very costly. While on the other hand, if the brand new car suffers major damages then it might not be stated as a total loss as the actual cash value of the new vehicle will be high.
What Exactly Happens After Your Vehicle Declared As A Total Loss?
Once an auto insurance company declared your vehicle a total loss, the insured amount mentioned during the signing of the contract will become the basis for the calculation of the loss indemnity. It also involves depreciation at a certain fixed percentage as mentioned in the policy. However, if your car is less than one year old, then this value will be calculated on a pro-data basis and the insurer will pay for a replacement model or purchase value of an equivalent vehicle.
Keep in mind that the best car insurance in Dubai with collision coverage will help you to bear the loss easily that arises when your vehicle is declared as a total loss by the insurance provider. In addition to this, car insurance Dubai helps in reducing the financial burden on a policyholder on buying a new vehicle. Thus, it is very imperative for every car owner to choose the best car insurance policy for their vehicle so that they can make the most of it in times of need.