One of the common issues faced after a road accident is figuring out how to finance the damages and losses incurred. However, if you have comprehensive car insurance coverage, you don’t have to worry about this because the insurance company will cover the related repair costs without you having to pay out of pocket. But what happens if your car is involved in an accident and declared a total loss?
Basic Things You Need to Know About Total Loss Car Accidents
If you’re involved in a road accident, your car is typically considered a total loss by the insurance company when the cost of repairing the car exceeds the actual cash value of the vehicle. What does it mean for a car to be a total loss? And what is meant by the actual cash value of the vehicle? Learn more about total loss car accidents in this article.
1. What is Total Loss?
A vehicle is declared a total loss by the insurance company if it is deemed unsafe, beyond repair, or if the estimated cost of repairing the vehicle exceeds its actual cash value. The actual cash value of the vehicle in this context refers to the amount that the insurance company would pay if your vehicle is deemed a total loss.
In other words, your car is Beyond Economic Repair (BER) or Not Economically Repairable. Detailed examples can be found in 2 (ii).
2. Situations of Total Loss Cars
Furthermore, you should also know that a vehicle, whether it’s a car or motorcycle, is considered a total loss by the insurance company due to two conditions:
Severe Damage and Unsafe for Repair
Munir’s Perodua Myvi was involved in an accident with a van. As a result of the accident, Munir’s car was severely damaged and sent to an insurance panel workshop.
After being inspected by the insurance adjuster to determine the amount of loss, the insurance adjuster confirms that Munir’s car is not safe for repair – the insurance company usually declares your car as a total loss.
Vehicle Repairable, but Repair Costs Exceed the Actual Cash Value
In another situation, Jung Meng’s Proton Persona was involved in an accident and can still be repaired. However, after the assessment is done, the insurance company finds that the estimated repair costs (including car parts) exceed the actual cash value of the car.
For example, the estimated repair costs for the car damage amount to RM25,000, but the actual cash value is only RM15,000.
In such cases, Jung Meng’s car will also be confirmed as a total loss because the estimated repair costs exceed the actual cash value of the car.
3. Compensation for Total Loss Cars
If your car is declared a total loss, you can make a compensation claim from your insurance company. However, the claiming process is subject to your insurance policy – total loss claims can only be made by the owner if your car is protected by a Comprehensive Insurance Policy.
If your car is covered by a Third Party, Fire and Theft Policy or a Third Party Policy only, you are not eligible to make a claim with the insurance company.
Calculating the Amount of Compensation for Total Loss Cars
Basically, the amount of compensation you will receive is determined based on the coverage amount or sum insured of your car – either based on the car market value or agreed value.
If the coverage amount of your car is based on the market value, the compensation will be paid based on the market value of the car at the time of total loss, not the market value of the car when you renew your car insurance.
Sum Insured (Based on Market Value) at Insurance Renewal: RM20,000
Received Compensation Amount: RM12,000 (Based on Current Market Value at Total Loss)
If the sum insured of your car is lower than the market value at the time of loss, the insurance company will only cover a portion of the loss based on the proportionate difference between the market value and the sum insured. However, this calculation formula only applies if the under-insurance amount exceeds 10 percent of the market value.
If you choose the agreed value option, you will receive compensation according to the sum insured. For example, if you choose an agreed value of RM20,000, which is agreed upon by you and the insurance company, you will receive compensation of RM20,000 if your car is declared a total loss.
Sum Insured (Based on Agreed Value) at Insurance Renewal: RM20,000
Received Compensation Amount: RM20,000 (Not Affected by Depreciation)
This amount will not be affected even if the current market value of your car has depreciated.
4. Procedures for Claiming Insurance for Total Loss Cars
Basically, the process of claiming insurance for total loss cars is not much different from the process of claiming insurance for accident-damaged cars. However, if your car is a total loss, the insurance claim should be made under Own Damage Claim.
Once your claim is approved by the insurance company, an offer for the compensation amount will be made. If you agree with the offered compensation, you need to submit several additional documents, such as:
- Motor Vehicle Ownership Transfer Statement Form Other Than Voluntary Transfer of Registered Owner (JPJ K3A) (two copies);
- Vehicle Registration Cancellation Application Form (JPJ K1C) (copy) – if applicable;
- Insurance policy (original copy);
- Car grant or vehicle ownership certificate (original copy);
- Release letter from the hire-purchase company – if applicable;
- Copy of identification card (certified by a Commissioner for Oaths);
- Original vehicle keys (two sets).
*The required document list may vary depending on your insurance company.
Once completed, the insurance company will process the compensation payment to you. If you still have an outstanding car loan balance with the bank, the insurance company will make the payment to the bank according to the approved compensation amount.
This means if the car loan balance is RM30,000, and the approved compensation is RM20,000 – the insurance company will pay RM20,000 to the bank, and you need to settle the remaining RM10,000 balance with the bank according to the agreed monthly installments.
However, if the compensation amount exceeds the outstanding balance, you will receive the remaining compensation after settling the balance with the bank.
5. Can You Make an Insurance Claim if Someone Else Was Driving the Car in a Total Loss Accident?
Yes. Basically, you can still make an insurance claim if there is a total loss accident while someone else was driving the car. However, if the driver is not named in the policy or you don’t have coverage for all drivers (all driver coverage), you will need to pay a compulsory excess of RM400 to your insurance company.
Hopefully, this guide on total loss cars can assist you in case you encounter a situation that requires you to make an insurance claim. Additionally, if you want to renew your car insurance, you can visit Qoala’s website for more information. You can compare and choose the best insurance company and get a free car insurance quote with an easy and fast process.