So you crashed your car. And it looks really bad. So bad you may never drive it again. What can you do with this totalled lump of twisted metal? For starters, you can contact your insurance company and have it declared a total loss. But what exactly does total loss mean? In this article, we will go through how a total loss is decided and what you can do should that happen.
How total loss is decided
There are generally two reasons an insurance company will decide that a car is declared a total loss or Beyond Economic Repair (BER). There are two ways this can happen: either it is uneconomical to repair, or it is unsafe to repair.
Uneconomical to repair
As it says on the tin, it means the car is far too expensive to be repaired or the repair costs exceed the car’s value. How can this happen?
As we have covered before, all cars depreciate. Let’s say you bought a new Honda City for RM90,000 and then owned it for five years. And in that time, it depreciates to RM40,000 before getting into an accident. The car is taken to a panel workshop. There the car is examined by an insurance adjuster appointed by the insurance company. The insurance adjuster then decides that the repair costs would be RM50,000.
As the car’s repair costs exceed the car’s value, the car is considered a total loss and will not be repaired.
Read more about Car depreciation!
Unsafe to repair
In this case, the car has been damaged so thoroughly that even if the car were to be repaired, it is no longer safe to drive. This can be caused by structural damage to the chassis itself, making it unable to protect the occupants should another accident occur.
Read more: How safe is your car?
What can you do in such a situation? The first thing you should do is to make a claim provided you have a comprehensive policy. You cannot make an insurance claim if you have a third-party or third-party, fire and theft policy as they do not cover your car.
If you do have a comprehensive coverage insurance policy, the sum insured of the car will determine your compensation. This is the value you choose when you set or renew your car insurance. From here, you have two options on how to claim: market value or agreed value. For our scenarios, we will be using a Honda City with a market value of RM40,000.
If your insurance provider will compensate you based on the car’s market value, you will receive exactly that, no more, nor less. Not even if you are insured for more.
For example, you are insured for RM30,000 but your Honda City is worth RM40,000. Therefore, your car’s market value is higher than the sum insured. In this case, you will receive the insured RM30,000. If you have an outstanding loan of RM35,000 on the car, the insured amount will be paid to the bank and the balance of RM5,000 has to be paid out of pocket. If the outstanding loan is RM20,000, the money will be paid to the bank and the remaining RM10,000 will be transferred to you.
In this case, you will receive compensation equal to the agreed value, regardless of the car’s market value.
Let’s look back at the Honda City valued at RM40,000. If you have an insured sum of RM50,000, you will still receive RM50,000 even though the car is worth RM40,000. However, not every insurance company offers a sum insured based on the agreed value, and if they do, the premium may be higher.
Read more: Car insurance in Malaysia
How to make a total loss claim
The initial steps are the same as that of an accident. Go to the police station, get a police report, and pass the following documents to the insurance company:
- Police report
- Insurance policy
- Vehicle ownership certificate (Car Grant)
- Copy of IC and Driving license
- Acknowledgement letter
- Photos of the accident scene
Read more: Dealing with an accident
Once the insurance adjuster assesses your car is a total loss, you will have to make an Own Damage claim. If you accept the offer the insurance company makes, submit the following documents:
- 2 copies of the JPJ K3A transfer from
- JPJ K1C vehicle cancellation application form if necessary
- Insurance policy
- Original vehicle ownership certificate (Car Grant)
- Letter of release from the hire purchase company if applicable
- Copy of your identity card certified by a Commissioner for Oaths
- All sets of original car keys
Once everything is complete, your insurance company will make the payment to you. If you still have an outstanding car loan, your insurer will make the payment to be bank.
Different insurance providers may require different documents. Contact your insurance provider to obtain the list of required documents.
So that is what you should do when your car is considered a total loss. To ensure you can get the best coverage for your car, you can renew your insurance with myTukar. Key in your personal details and get a quote from up to 6 insurance providers instantly! You can also key in the code MYTUKAR10 to enjoy a 10% discount! Terms and conditions apply.