Sunday, March 27, 2011

Customer should know … in event of major car loss

Insurance claim process should be known to the INDIAN customer in the event of claim to enable him to get his legitimate insurance claim out of an insurance claim and more so in the event the vehicle having suffered major loss, wherein Insurers and Surveyors will be negotiating for settlement of claim and informing you of insurance related terms as Depreciation, Total Loss, Constructive total loss , IDV, Net of salvage, Cash loss settlement and salvage value .

In India the car losses, for major losses if considered on total loss basis by insurers market value of the vehicle is not considered ,but the concept of IDV ( Insured Declared value) is taken and the customer in event of total loss can claim full insured value of his car as per IDV. The criteria of consideration of claim on total loss basis is subject to condition that if the vehicle has suffered loss more than 75% of the insurers liability on repairs basis based on IDV of vehicle. In case the vehicle is Total Loss then the insured is paid the full IDV and he has to get the vehicle salvage shifted to the insurers desired premises and has to transfer the ownership rites in favour of the insurers or has to get the registration of the vehicle cancelled from the registration authority ( RTO) as directed by the insurers.

Constructive Total Loss is another type of settlement, when the insurers settle your claim as Total loss. This mode is generally adopted when the IDV of the vehicle is less than its market value and liability of insurers on total loss basis is in interest of insurers. In such cases, if IDV less salvage value is lower than the repair liability such mode may be adopted.

Cash Loss Basis is another way of settlement of claim and in such cases the insured is paid repairs cost less some percentage as agreed by the insured and insurers mutually and is generally about 30% . In this mode of settlement the settlement is done prior to vehicle being repaired and the insured after settlement may get the same repaired in any manner and at any workshop and does not have to prove that that the vehicle is repaired and does not have to submit the bills of repairs. Such mode is opted mostly in case where insured claims as per authorised workshop estimates and after settlement on cash loss basis may get the repairs carried out at some local workshops with used parts and depends on the financial status of the insured.

Cash Loss Basis Net of Salvage.. in this type of settlement in event of major loss the settlement is on total loss basis and salvage is also retained by the insured. Thereby the insurers pay the customer the IDV value less salvage value of the vehicle and any other additional deductions as per the policy. Thereafter the insured is free to either repair or dispose off the vehicle and does not have to submit the bills of repairs or transfer the ownership rites to the insurers.

IN INDIA at present many cases are mostly being settled on cash loss net of salvage basis and mostly by the private insurers.


There are some more factors operative in settlement on cash loss net of salvage basis. With their own pros and cons.
On very few occasions that the insured may agree for settlement on cash loss net of salvage basis in its true spirit. Thereby he after settlement will retain the salvage himself and will get the vehicle repaired by him-self from some unauthorised workshop and thereby make the said mode of settlement beneficial for him as otherwise if he get the vehicle repaired from authorised workshop then the said mode will definitely be a loss making settlement for him.
However on most of the occasion the said mode of settlement is adopted in reports of insurance companies and is consented by the insureds , In practice in such cases the biggest hurdle is that the customer/ insured is not interested in retaining the salvage and either the insurers or the surveyors facilitate to arrange for the salvage buyers and thereby the said hurdle is overcome.

CAUTION ....  As per section 55 of MV Act, for all vehicles which are destroyed or rendered incapable of use the RCs need to be cancelled. 
The said duty is of the owner of the vehicle. If owner retains the vehicle and get it repaired on his own then there is no problem, but when he sells the vehicle salvage then he should take preventive measures against misuse of the salvage by buyer. The customer should demand from the insurers / surveyor regarding certification confirming the salvage value deducted by them and also importantly confirming that the value so deducted was considered for disposal with or without documents. The same will have bearing on the future sale of the vehicle. If they deduct the value without the documents then one should get the RC cancelled and dispose the wreck and should not get it repaired. If the value quoted is with the documents then customer may sell the salvage with documents if he so desires after taking some preventive measures as discussed in a related article in this blog.

Many a customer of private insurers do sometimes claim that they were paid the reduced IDV which is violation of the insurance policy in INDIA. They complain that collective value paid to them for the salvage and insurers is less than the IDV and they had given the consent for the same for settlement purpose. This complain is mostly reported against private insurers in INDIA but the same is not the true representation of all the cases.

CASH LOSS NET OF SALVAGE BASIS is also a very good way of settlement of claims and is mostly helpful to the customers as explained in major loss cases.

In event of major loss if the liability of insurers is less than 75%of IDV then the option available is for repairs basis, but there is mostly a vast difference in market value and the IDV as IDV is a scaled value system for all type of vehicles. In many cases it is not adviseable as said repairs will not be economical for the insured as even after the repairs the market value may not be worth to bear the burden of depreciations etc. Also in many cases after the accident the insured does not want to retain the vehicle for phycologial reasons in event of major loss. In such cases he may propose to insurers that his claim though not falling under Total loss be settled on cash loss net of salvage basis on reduced IDV value thereby making the settlement for insurers in their interest and changing their decision from repairs basis to to cash loss net of salvage basis.


IDV is Rs 3,00,000.00
Repairs liability Rs 1,50,000.00
Depriciation on Repairs basis to be born by insured Say Rs 40,000.00
Salvage value Rs 1,00,000.00 on Total loss basis.
In above case the insurers will insist on repairs basis and say if the market value of the vehicle after repairs will be Rs 2,50,000.00 then the customer should try to get his vehicle settled on reduced IDV basis as consented mode of settlement.
Here if the insured proposes to the insurers that he is ready to settle his claim on cash loss basis for Rs 2,50,000.00 or say Rs 2,40,000.00 and the salvage be arranged for disposal ( Provide facilitation for salvage disposal) this will make the liability of insurers on cash loss net of salvage basis as Rs 1,50,000.00 or say Rs 1,40,000.00 respectively for the above values. This will now be in interest of the insurers and they can not ignore the said proposal of the insured. Here the insured is also not at loss as he assumes that he had to bear depreciation part only.

Cash loss net of salvage basis on reduced IDV basis on consented basis is very effective way of settlement of losses, Any forced settlement by this system  on the customer should be avoided and customer should be educated about this mode of settlement also and if he proposes on his own will for the said mode then only this mode should be adopted.

More to come in forthcoming posts……


  1. Sir, my car met with an accident and according to the surveyor, the loss amount is less than 75% of IDV hence the claim is not being considered as Total Loss. He suggested us for a cash loss. Sum insured is Rs. 315000/-, and he is offering us only Rs110000/-. And he has told us that it is our responsibility to sell the car to a scrap dealer. The car is parked in a garage with a parking fee of Rs.200/- per day and it's almost two months now. How am I to know any scrap dealer. A scrap dealer has offered just one lakh. I am at a loss. The car is just over a year old now. I have mailed the insurance company on whose responsibility it is to sell the car, and they replied straight that they are not responsible for the same. Kindly suggest me what should be done. Thanks in advance.

  2. From your comment it seems that cash loss mode is not in your interest and then you should discuss for repairs basis as mode of settlement.
    cash loss basis of settlement can be done with your written consent and further subject to your insurers approval.

    You should however check the depreciation part with the surveyor which you will have to repairs basis and then only should make a final decision on mode of settlement/repairs


  3. Mr Naresh I totally disagree with you as for as Mode of settlement of reduced IDV and Net of Salvage loss Basis. Friend, we have to strictly adherred to the terms and conditions of the policy of insurance while settling the losses. The policy says IDV cannot be decreased within the currency of the policy at any cost. The assessment on reduced IDV basis can be initiated in rarest of the cases where the Insured gives a valid or genuine reasons and it should not be made a standard practice. As for as the Net of salvage loss basis mode of assessment is concerned, it is not a valid mode of settlement defined in the policy wordings. finally, I must tell you that the loss has to be assessed on terra firma and we have not to see the convenience or interest of the insured or the insurers as we are supposed to be unbiased. as per GR8 if the loss exceeds the 75% of the IDV only then the vehicle can be declared by total loss or otherwise, the repairs have to be carried out......... Now i come to your cash loss basis, it is only initiated after assessing the damages present on the vehicle vehicle on repairs basis.finally when repairs exceed 75% of IDV, comparative statements of salvage value does not hold good..... now we the surveyors have to assess the value of the wreck or salvage only and have to define it in our report and it is not to be sold by a surveyor at all, only Insured or Insurers have to excercise it after doing certain formalities.

    I hope, i am clear to you

    KB Manchanda

  4. Thanks for your attention on my query, much appreciated. I am at loss even in repairs case as broad estimated total repair cost is 175000-200000 and my liability is over 60k. And even after repairs I am not sure if car will run in absolute proper way. Hence I am not keen keeping this car after repairing. And if I sell it after repairing, I don't know what value I will get on selling this repaired car. My car's IDV is 315000, and I seek your advice as to how can I bargain a better value from insurance company.

  5. Sir
    My car (Skoda Rapid) met with an accident and the estimate is around 9 lakhs. IDV is 8.41 Lakhs. Insurance policy details ICICI Lombard 0 depriciation & the car is just 5 months old. when we took the vechile they said its bumper to bumper cover so i selected 0 depreciation policy and paid 10 thousnad extra premium. Now insurer says that we can give only 90% of IDV value to you car as per the cash loss policy. the vehicle will be given for auction and then will settle the issue. They added it may take 10 to 15 days to sell the car. But i feel the estimate what they quoted is high bcos windshield is not broken and doors are in good condition but they have added those also in the list. what i can do ryt now and is there any way to get good negotiation from insurer.
    Another thing is that- should i sumit my RC & insurance policy originals at the time of settlement?
    Thanks in advance.

    1. Selva, Please mail me your contact number to my mail id My skoda Rapid is 3 months old and it has been declared as a total loss. I would like to discuss it with you to get a better understanding.

  6. I agree with you and also think that the customer should know the things to do and not to do in case of unbearable loss in a car accident.
    auto transport , car transport , free auto transport quotes

  7. My car is valued as INR 435000 and 6 months back met with an accident the cost of repair was 2 lacs. Would this be treated as total loss or salvaged, which eventually would resulting in the null and void vehicle warranty??? If there are a few parts which were supposed to be replace as warranty can the vehicle company deny the claim saying major accident ceases the warranty? all the accidental work was done at authorized dealership and bodyshop...

  8. Your info and guidelines can be a great help for the people who do not know so much about the cars but they have to unaffordable car loss. They can follow these tips to reduce the burden of loss.
    Auto Transport Quotes

  9. Sir My car is valued IDV of 3,00,000/- in which 2,80,000(car)+ 20,000(LPG).
    after deduction of Depriciation amout paid by isurance company is 2,23,706/- and Insurance company has write a letter to me that amount of repairing is less than 75% of IDV. so what should I do?

  10. Dear Raj

    Read the article again and you will be in a better position to decide. One more point you should keep in mind that salvage value on repairs basis will be in your case will be around Rs 4000.00 (Assumed) and on total loss basis will be around Rs 25000 to 60000.00(Assumed). Also there is every possibility that on dismantling the vehicle some more hidden damages are found . All these facts should be discussed with your surveyor loss assessor ( INDEPENDENT) and he will assist you in arriving at a settlement with approval of your insurers.

  11. Sir my car met with an accident and the survey has been done and the insurance company people told me that its a total loss as the estimate given by the showroom exceeded the car's cost price. Now they are saying me that they are going to pay me Rs.179000 and hand over the car to me for further disposal. But i dont want the car. I need the full insurance amount of Rs.300000. I am paying a charge of Rs.200 per day for parking it in the garage. Can i get the full insurance amount on the claim? If so, then let me know the procedure please.

    1. From your information it implies that insurers are settling on total loss basis on net of salvage basis and must be deducting Rs 1000.00 for excess clause from Rs 180,000.00 and may have put salvage value of Rs 1,20,000.00.

      This implies that you have to find salvage buyer on your own who will buy your vehicle with RC document. Keep in mind regarding sec 55 of MV act provisions.. You should take preventive measures while handing over the vehicle to salvage buyer by taking legal document from him for handing over the vehicle and responsiblity. you may consult some more articles on the related subject like how to prevent misuse of salvage.

      the best way to be educated on the matter and take help of some known persons and then discuss the matter with insurers and surveyors.

  12. Sir,

    I have brought new indego ECS car in OCT-2010. I have insurance of 3 laks (IDV) now from bajaj allianz. On 2-Feb my car caught fire in the bonnet in parking. I have the police report for that. Now the actual repair cost of my car as per the showroom guys is 5 laks as all the engine and other parts are totally burnt. The tata showroom guys are telling that the car will go in total loss. I have insurace value as 3 laks which is taken on 10-jan-2014.
    Can you please help me in this case. I have below questions
    -How much value should i get in the total loss case?
    -How do i negotiate to the insurance company to get the maximum benifit
    - If the insurance company is settles the claim Will insurance company take my car to there custody?
    - Can I claim for the tata motors for this mishap? My car does not have any extended warranty. I had many discussions with the delaer they are saying that your CAR is out of warranty so they can not help. I have done proper servicing of my car in the authorised showroom and haven't added any car accessories. Can you please help me what needs to be done in this case.

    Thank You

  13. Hi sandeep bhosale, i have faced the same issue with indigo ecs 2010
    1 week back can you pls contact me on

  14. Hello. I am in trouble. Need advice.

    I learnt it the hard way that my vehicle was underinsured. Its IDV is 47k. It was on fire while parked. The repairs estimate from authorized service Centre is 55k. If I go to a local mechanic it might be around 30-35k. The insurance company says they got a salvage auction bid of 47k,same as IDV. So they are saying either surrender your vehicle and take the IDV (total loss) or if you want to keep it, repair on your own. They won't pay anything.

    I don't want to give away the vehicle. It has a sentimental value attached. What are my options?

  15. Hello- thanks for a great article. Giving particulars of my case and request your advise to repair or settle please..
    Honda Brio automatic 2013. IDV Rs. 4,90,000. Repair estimate Rs. 3,00,000, with insurance company liability of Rs. 2,40,000 and mine for Rs. 60,000 approximately. I asked for settle option and have got following offer......insurer will give 30% less than their repair liability i.e. 1,68,000 and also agree to facilitate e-auction which will fetch Rs. 2,00,000 and will be paid to me.
    Market value of car is close to IDV of Rs. 5 lakh, of course I don't know how much it will be post repair..
    I feel the 30% deduction is very high....shouldn't the insurer pay me the full Rs. 2,40,000 (full repair liability) plus the salvage of Rs. 2,00,000 i.e. Rs. 4,40,000.....which is anyway less than the IDV?

  16. Hi All,

    Need your immediate help on my car insurance, few days back I have been in an accident and as car was damaged thus i towed the car to near by authorized workshop under my insurance scheme.

    Now, after final estimate from workshop which is around 480000 , it seems to be a total loss case as my IDV value is Just 510000 and estimate of repair is clearly exceeding the 75% of IDV now.

    However, I'm not thinking for opting the "Total loss" and want to get my car fixed as damage was not that high but it seems workshop guy has created an unacceptable estimate so that he can generate his own benefit from current situation.

    I was thinking of below solution, kindly suggest and provide your input so that i can reach to a final decisions and minimize my loss.

    Total IDV value : Rs 510000 , 75% of IDV Rs 382500
    Estimate to fixup the car : Rs. 480000

    can I ask or negotiate my insurance company to pay a little less then 75% of IDV ( say 375000 ) so that i can add the remaining amount of Rs 105000 ( 480000-375000 ) and get the car fixed at first place.

    The reason I'm asking this as my car is just 3 months old and don't want to loose so much money as if I opt for IDV value then also i have to pay for the car loan amount ( which is currently in figure of 280000 )

    kindly provide your suggestion and help me from this dark situation of so many losses.

    Much Thanks..
    Sincere regards,

  17. Thanks for sharing useful information with us about selling salvage cars. Your info will definitely help the readers and please keep sharing some more info with us.

    Junk Cars For Money | Junk car for cash | Junk cars

  18. I wish to know a simple thing. 75% of IDV is calculated on aggregate repair cost or liability of insurer?

  19. Dear sir,
    My car was flooded and is not getting started........ was taken to the service yard and posted a insure claim..... surveyor came and inspected and says total loss may be (electrical parts he charged 1.99Lakh and labour charges is yet tobe given may be today) ....... my card IDV is 3,29000/- it is Datsun Go. Kindly advise..... what to do.

  20. Good Post, this is really helpful for me and the Chennai Flood Car Owners. I am going to share it.

  21. Dear Sir,

    My car Hyundai i10 got fully submerged in Chennai floods.

    It is 2011 Model, with IDV Rs. 2,50,000.
    The authorized dealer has given repair estimation for Rs. 2,60,000/-. But the insurance company is saying they will pay only 60% of the IDV.
    But I am insisting for 100% IDV. (i dont want to repair and use the vehicle).

    Can I insist for IDV even if the insurance company says that they can pay only 60%?

    Can I succeed my demand or the Insurance company has the final say?


  22. This comment has been removed by the author.

  23. Hi All,

    In the recent flood at Chennai, My car has submerged and got repair estimation by workshop.

    ~ Ford Figo(Diesel) 2012 Model
    ~ IDV 3,28,000/-
    ~ Insurance: New India Assurance
    ~ Repair Estimation 2,15,000/- (only for parts, not included for engine). (approximate labour cost 25,000 + tax will be added later)

    They told that will be delivered after 2.5 months! that too not assured!!
    I am worrying, after the long gape whether serviced vehicle will be perfect for run?

    So, I insist to the surveyor to consider Totall lost.
    He saying 60% (claim amount)/40% salvage that has to be handle my own! He said that I can repaired and keep myself or can sell for scrap.

    Is my decision is right? is it so, is it worth to get claimed?

    Please give a suggestions.


  24. Dear Sir,

    I repaired my car after the 'Cash loss basis net of Salvage' and it is in the same condition as before. I have following quarries.
    1) will there by any problem in selling the caar?
    2) The claim history will be available for all the people and Insurance company?

    1. In ideal condition the R/C should have been suspended under Sec 53 of MV act and after repairs and satisfaction of RTO concenred for having done satisfactory repairs and vehicle again fit to ply on roads the RC would have been revoked.

      But the said process is not be followed and since the insurers settle without same on net of salvage basis, thereby no such records in RTO get maintained. Further if you have got your vehicle repaired from authorised workshop then the history will show for such repairs in the records but if you got your vehicle repaired at outside workshop then there will be no record of your vehicle repairs and even for the damage.

      Only record willl be with the insurers having settled the claim and that is not a public record. So you can get your vehicle again insured after preinspection of the same and will not be required to declare for such damage and in india will not be reflecting your vehicle as salvage title vehicle.

      At time of sale only a prudent inspection may find that the vehicle had been repaired. However if your vehicle details had been listed by insurers / surveyors at the web with identification numbers like engine number and chassis number and registration number onlyu then your vehicle can be searched on the web in damaged condition.

      At time of sale it will be solely at your moral charactor to declare for the damages or not to the new buyer in your case as it seems

      Have a nice day

  25. Thank you for the detailed explanation. This helped me a lot in getting the claim approved.

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