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When your car meets with an accident, it can lead to many disastrous effects. The impact can be both on the owner as well as on the vehicle. The owner might go through physical and mental trauma, while the car goes through physical damage. Therefore, when faced with severe damage to your car, what options does one have? Should one proceed with a new purchase or should they fix their damaged car?

These are the situations where your car insurance company will make the decisions for you, whether that revolves around repairing your damaged car or declaring it as a 'total loss'. Thus, when one goes through these decisions by their insurer, that's when they need to have viable knowledge regarding the extent of familiarity of such claims.

What does it mean by 'total loss'?

When a vehicle is considered 'total loss', it means that the sum of money required to repair it to its pre-damaged state is more than a certain percentage of your car's value. This percentage depends upon the insurance company that insured your vehicle. While there are individual companies that total the vehicle when damage exceeds 80% of its pre-accident value, most insurance companies in the UAE have put the limit at 50%.

Calculation of 'total loss.'

A lot of factors come into consideration when the total loss and actual cash value of the car are calculated. Here are the elements –

1. The physical and mechanical condition of your car is inspected by a company that is appointed as 'adjuster'. They then decide whether the vehicle should go for repairing and the sum of money required.

2. After the inspection, the 'Actual Cash Value' is calculated by considering the following factors –

- Manufacturing year

- Depreciation value

- Model and make

- Mileage

- Wear and tear

- The demanding value of the vehicle

3. The determining value depends on the assumed market value of the car in its pre-accident state.

4. When the damage exceeds 50% of this calculated value, then the total loss will be declared.

The Actual Cash Value depends on various factors; this is since the damage suffered by one car to calculate this value might be different for another vehicle, and so on.

Result of total loss declaration

Once a vehicle gets marked as a total loss, their insured value during the purchasing of the insurance contract will be taken as the basis for calculating the indemnity for the loss. There is a fixed percentage of depreciation at 20% per annum, as stated in the policy. For the vehicles that are less than a year old, this value gets calculated on a pro-rata basis. The company will then proceed to pay for a replacement model or purchase value equivalent to another vehicle.

If you have the right insurance policy that comes with collision coverage, then it will cushion the loss that arises when the vehicle gets totaled. They will also help to minimize the financial burden while opting to purchase a new car. Therefore, it's highly advisable always to compare car insurance plans and then choose the one that is right for your needs.

policyhouse.com guides you for a safer ride

If you are looking for a safe and efficient way to find the right type of insurance policy for yourself in the UAE, then policy house is your right choice. With direct connections to multiple insurance providers in the UAE, we also provide information regarding any queries that you have, or you intend to know before opting to purchase an insurance policy. Whether its providing information regarding the most common insurance scams or offering tips that help you to compare your options and get the best price, you can always count on our team.