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Total damaged car's insurance process

Discussion in 'Insurance & Loan Reviews' started by sachinls3, Nov 29, 2011.

  1. sachinls3

    sachinls3 Amatore

    Messages:
    101
    Pune
    Hi Folks,

    I had a query on total damaged/write off state vehicle. Recently, one of the friend’s Wagon R met with an accident. His car went into a ditch which was 10-15 feet deep.

    All his family members are safe, not a single scratch but the car is damaged too much.

    The Maruti service center quoted 1.96 Lakhs in repairs. His Insurance is with Bajaj Allianz, they haven’t yet inspected the car thoroughly, but I have doubts regarding if in case his car is declared total damage what would be the procedure of the insurance company to pay him?

    His car’s Insured amount is 2.7 lakhs. My understanding was that this full amount will be paid back to him since the car is total damage. But when he enquired about this, he was told by the company that his car will be auctioned and whatever amount is collected in that auction, only that much will be paid to him which will obviously be way less than 2.7 lakhs.

    Is this really how a total damaged/written off car’s insurance is processed?

    Mods: I opened a new thread since I couldn't find a similar topic, please merge this with appropriate topic if required.
  2. shams

    shams Esperto

    Messages:
    2,388
    Bangalore
    If the repair cost exceeds 75% of IDV then these options (3 options mentioned below) are to be looked at.
    In your friends case it is around 73% but it all depends on whether Ins company will have to shell out more on repair or in Total loss.
    In a major accident if a car is damaged too much there can be 3 possibilies:
    1.Total loss: this means the car is damaged so much that it cant be repaired
    2.Constructive Total loss: car can be repaired but the cost of repair is more than 75% of IDV.
    3.Net Off salvage: This a mutual settlement btw owner and Ins company where Ins company will pay some amount and take full ownership of the car.

    Usually the insurance company will push for the 3rd option because in 1st and 2nd they cannot demand the RC from the customer as per IRDA rules where as in 3rd they can.
    So I guess they will ask your friend for the third option. And for this they will evaluate the estimate and bring their share below 75% of IDV

    The amount to be paid here depends on the type of policy. I am assuming his policy is not the one with zero depreciation.
    -For zero dep policy they will pay the full IDV - 500 rs of processing charges
    -In a normal policy they will calculate the depreciation from the IDV. That depends on how much time back the policy was renewed. Usually it is around 15 % for an year. it would be deducted in that proportion. eg. if 6 months back it was renewed then 7.5 dep will be applicable.
    Rest of the amount will be paid by the insurance company to the owner.
    This amount contains two parts:
    Salvage value: money got by selling the damaged car
    Difference amount: IDV - Dep amt - Salvage value. This will be borne by the ins company.
    They two amounts are paid separately.
    Hope this clears your doubt.

    However there is a possibility that the Ins company will further reduce the estimate and if their share in the repair cost comes to be less than "IDV - Dep amt - Salvage value" then they would try and push for repair.
    Last edited: Nov 29, 2011
    3 people like this.
  3. Viny

    Viny Esperto

    Messages:
    1,742
    :)
    Very well explained Shams, Other thing to note is that dont hand over the RC to insurance company, as you can get back a part of your life time Road tax paid to RTO, which would otherwise go to Insurance Company.
  4. shams

    shams Esperto

    Messages:
    2,388
    Bangalore
    That wont happen in this case. As per IRDA rules only in case of Total loss/ Contructive total loss, RC should not be surrendered.
    For that to happen, estimate given by the insurance company (Insurance company's share) should be more than 75% of IDV which is unlikely here.

    In this manner they usually bring down the estimate below 75% and then the case is considered for Net off Salvage. In that they take full possession of the car including RC.

    So we can retain the RC only in such cases where the car is so badly damaged that the insurance company's estimate (their share) goes above 75% of IDV.
    Last edited: Nov 29, 2011
  5. Viny

    Viny Esperto

    Messages:
    1,742
    :)
    Then i guess, he should ask his friend to talk to service center manager to raise the repair cost above 75% :p, which is not a big issue for them :D
  6. shams

    shams Esperto

    Messages:
    2,388
    Bangalore
    @Viny, if that was so easy to do, insurance companies would close down pretty soon suffering huge losses :).
    Whatever estimate SC gives it doesn't matter much. Insurance company surveys independently, checks the damage in and out and then gives the least possible estimate.
  7. varunrtr

    varunrtr Esperto

    Messages:
    1,256
    KL-01/ TO
    Grande Punto 1.3
    hey shams, do you work for some insurance company? just bumping you with some questions which i want to know.
    When the insurance company checks it, they will inspect it only from outside and how will they know if some other parts are damaged from inside or not? and What happens to the warranty of the parts that are changed during the repair process? What if we find that some parts were not changed during this, coz the surveyor didnt approve it at that time, due to non visibility of damage as i stated above?
  8. royj

    royj Esperto

    Messages:
    1,306
    Trivandrum
    Varun, don't underestimate the insurance surveyors. They are in this business for a long time for just this reason.
  9. shams

    shams Esperto

    Messages:
    2,388
    Bangalore
    @varunrtr, :) i dont work for any Ins company. Am aware of all these things since my car underwent a major repair and further addition to my knowledge happened when a friend's car met with a major accident.

    The guys from the insurance company who do the survey check the damage on every part mentioned in the SC's estimate and see if it can be repaired or needs to be replaced. Warranty would stay as long as everything is done at authorized SC.

    In case of a repair, the actual repair cost usually varies a bit from the initial estimate (may be more or less) as some of the things may become clear only once the repair work starts. It again depends on how accurately the initial survey was done.
  10. sachinls3

    sachinls3 Amatore

    Messages:
    101
    Pune
    Thanks Shams for such a detailed reply, I appreciate it :)

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