Total Loss vs. Repairable Damage: How Insurers Decide (India & Global)

When your car gets badly damaged, the big question is: Will the insurer repair it or declare it a total loss?

Understanding how that decision is made can save you time, money, and frustration.

What Is a Total Loss?

A vehicle is declared a total loss when the cost to repair it exceeds its current market value. Think of it this way—if fixing your car costs more than replacing it, insurers won’t spend money on repairs (Kelley Blue Book, 2025).

 Globally:

• In the U.S., states like Alabama use a 75% rule, while Colorado uses 100%.
• Some follow a formula:

Repair Cost + Salvage Value ≥ Car’s Value (Forbes, 2025).

In India:

As per IRDAI, if repair costs exceed 75% of the car’s Insured Declared Value (IDV), it’s considered a "constructive total loss."

If the car is stolen or completely unsalvageable, it’s termed "absolute total loss" (Bajaj Allianz, 2025).

How Do Insurers Decide?

Compare Cost to Value:

They assess your car’s:

• Age, mileage, and pre-accident condition
• Depreciation (e.g., ~15% per year in India) (IRDAI, 2025)
• Market data via tools like Kelley Blue Book or local dealer input
  
  

• Safety First:

Even if the repair cost is low, insurers may total the car if it’s unsafe to drive (like with frame damage) (Geyers Towing, 2025).

Salvage Value:

Insurers deduct scrap value from your payout.

Example: If your car’s IDV is ₹5 lakh and salvage is ₹1 lakh, you’ll receive ₹4 lakh (TATA AIG, 2025).

Real-World Examples

Canada: Lawsuit Against Undervaluation

Drivers sued insurers for using unfair formulas to undervalue totaled cars. The court ruled they must use fair market value, not internal tools (Gluckstein Lawyers, 2025).

Lesson: Always verify your car’s market value.

India: Lorry Dispute

Repair costs exceeded 75% of IDV, but the insurer denied full payment. After legal action, the owner received the entire IDV (Indian Kanoon, 2025).

Lesson: Know your rights and don’t hesitate to fight unfair claims.

What to Do If Your Car Is Declared Total Loss

1. Review Their Offer:

• Use tools like Policybazaar’s IDV Calculator to double-check (Policybazaar, 2025).
• Compare with recent car sales and classifieds.

2. Negotiate:

• Share receipts for recent upgrades (like tires or music systems).
• Get an independent appraisal if needed.

3. Choose Your Payout:

• Cash Settlement: Take the money and buy another car.
• Retain Salvage: Keep the vehicle (they deduct the salvage value from your payout).

 4. Cancel Vehicle Registration:

In India, report the total loss to the RTO within 14 days under the Motor Vehicles Act, 1988.

 Know Your Rights

In India:

Contact IRDAI Grievance Cell or the Insurance Ombudsman if claims seem unfair.

Internationally:

Reach out to regulators like the U.S. NAIC or the U.K. Financial Ombudsman.

 Bottom Line

Whether you’re in Texas or Tamil Nadu, here’s what matters:

• Understand your vehicle’s value
• Challenge unfair decisions
• Know your rights and use them

A little homework can save lakhs of rupees or thousands of dollars. Don’t let the insurer rush you—ask questions, review documents, and push back if needed.

Wondering what happens right after a crash? Here’s our step-by-step claims guide.

This also applies to rental cars. Understand how claims differ for rented vehicles in India.

If your claim offer feels unfair, check how to dispute a lowball settlement.

Sources & References: Total Loss vs. Repairable Damage

IRDAI (2025). Total Loss and Constructive Total Loss Guidelines, Insurance Regulatory and Development Authority of India.

Kelley Blue Book (2025). Vehicle Valuation Standards and Total Loss Thresholds.

Bajaj Allianz (2025). Motor Insurance Total Loss Claim Process – Bajaj Allianz General Insurance.

TATA AIG (2025). Understanding Car Insurance Settlements – TATA AIG.

Policybazaar (2025). Car Valuation Tool and IDV Calculator – Policybazaar India.

Forbes (2025). How Car Insurance Companies Decide on Total Loss in the U.S. Market.

Geyers Towing (2025). When Do Insurance Companies Declare a Vehicle Totaled?

Gluckstein Lawyers (2025). Canadian Class Action Lawsuit on Car Insurance Valuation.

Indian Kanoon (2025). Case Summary on Vehicle Total Loss Insurance Dispute – Indian Legal Reference.