The floods that hit several states in the Peninsula last December and early this year have profoundly affected the victims.
One of the victims, Hazalizan Ramli, 37, had to accept that his Perodua Myvi became a total loss due to floods in Jelebu, Negeri Sembilan, on December 17. Speaking to Utusan Malaysia, Hazalizan said he could only see his car in floods before being swept away by the strong current.
The floods that took away Hazalizan’s Perodua Myvi could have happened to anyone. What should you do if your car is damaged and deemed a total loss?
To help you, we will explain the meaning of total loss, compensation for the loss and insurance claim procedure.
What does “total loss” mean?
Generally, if a car is certified by an insurance company as a total loss, the vehicle is Beyond Economic Repair (BER). This means that the vehicle is unsafe or irreparable, or the estimated cost of repairing or replacing the car exceeds the vehicle’s actual cash value. The actual cash value of your vehicle refers to the amount that your insurance company will pay if your vehicle is a total loss.
To give you an idea, some of the total loss situations are as follows:
1) A vehicle is severely damaged beyond repair and no longer safe for usage
Imagine that a Proton Saga owned by an individual named Ahmad runs into an accident with a lorry. Due to the collision, Ahmad’s car is sent to a panel workshop. An insurance adjuster inspects and certifies that Ahmad’s car is a total loss. This is as his car is irreparable and no longer safe for usage.
Note:
An insurance adjuster refers to a person or entity registered under the Financial Services Act 2013 appointed by an insurance company. An adjuster investigates the cause and circumstances of a loss and determines the amount of loss.
2) A vehicle is repairable, but the estimated repair cost exceeds the vehicle’s actual cash value
Now, imagine that Ahmad’s car is repairable. However, the estimated cost of repairing his car and getting spare parts exceeds his car’s actual cash value. For instance, the estimated repair cost is RM20,000, whereas his car’s actual cash value is RM10,000. Ahmad’s car is a total loss in this situation as the estimated repair cost exceeds his car’s actual cash value.
Compensation for a totaled car
If your car becomes a total loss, you can make an insurance claim, subject to your policy type.
You can only make an insurance claim if you purchase a comprehensive policy. You cannot claim if you buy a third party, fire and theft policy or a third party policy.
So, how does an insurance company determine the compensation for a total loss claim?
An insurer determines the amount of compensation based on the sum insured of your vehicle. Before renewing vehicle insurance, you need to choose your vehicle’s sum insured according to the market value or agreed value.
Note that if you choose the market value of your car, the compensation amount will be based on your car’s market value at the time of the accident. The amount will not be based on the market value when you renew your insurance.
Below are the scenarios depicting the compensation amount if you choose the market value or agreed value:
Market value
- Vehicle’s sum insured following the market value during insurance renewal: RM20,000
- Compensation in the event of a total loss: RM12,000 (based on the vehicle’s market value at the time of the accident)
If the sum insured of your car is less than the market value at the time of the loss, your insurance company will only bear part of the loss in proportion to the difference between the market value and the sum insured. However, this will only apply if the under-insured amount is more than 10% of the market value.
Agreed value
- Vehicle’s sum insured following the agreed value during insurance renewal: RM20,000
- Compensation in the event of a total loss: RM20,000 (not affected by the vehicle’s market value at the time of the accident)
As you can see, the compensation amount for a total loss will follow the sum insured of your car if you choose the agreed value.
For your information, not all insurance companies offer a sum insured according to the agreed value. Allianz is one of the insurance companies that provide this. For example, suppose you choose an agreed value of RM20,000, the value you and Allianz have decided upon. In that case, you will receive compensation of RM20,000 if your car is a total loss, even if the market value of your car has depreciated.
Insurance claims procedure for a totaled car
The initial procedure to make an insurance claim if your car is a total loss is similar to the insurance claims procedure if your car runs into an accident. However, you will need to provide additional documents or items if your car is certified as a total loss.
General claims procedure
- Contact your insurance company to notify them of your car accident and request towing assistance to a panel workshop
- Take photos of your vehicle, other vehicles involved (if any) and the accident scene. Note complete information including the vehicle registration number and roadtax
- Lodge a police report within 24 hours
- Fill and sign the claim form and acknowledgement letter
- Submit the completed form and letter and the following documents to your panel workshop to be forwarded to your insurance company:
- Police report (original copy)
- Insurance policy or cover note (copy)
- Vehicle grant or Vehicle Ownership Certificate (copy)
- Policyholder’s identity card (copy)
- Policyholder’s driving license (copy)
- Driver’s identity card (copy) – if somebody else drives your car at the time of the accident
- Driver’s driving license (copy) – if somebody else drives your car at the time of the accident
- Acknowledgment letter (copy)
- Driver’s statement (if possible)
- Photos of the vehicle and accident scene
- The panel workshop and insurance adjuster will assess the damage and estimate the cost of repair and spare parts
Additional claims procedure in the event of a total loss
- If your car is a total loss, you will have to make an Own Damage claim. Once the insurance company approves the total loss claim and makes an offer to you, and you agree to the compensation offered, submit the following documents to your insurer (in addition to the documents listed above):
- JPJ transfer form (JPJ K3A) (two copies)
- JPJ vehicle registration cancellation form (JPJ K1C) (copy) – if applicable
- Insurance policy (original)
- Vehicle grant or Vehicle Ownership Certificate (original)
- Letter of release from the hire purchase company – if applicable
- Copy of your identity card certified by a Commissioner for Oaths
- Original car key (two sets)
- Your insurance company will make the payment to you
- If you still owe the bank on your car loan, your insurer will make the payment to the bank following the approved claim amount. For instance, assume that the approved claim amount is RM20,000. If you still owe RM30,000 to the bank, your insurer will pay RM20,000 to the bank while you will have to pay the remaining amount according to the monthly instalments. However, if the claim amount exceeds the amount you owe to the bank, you will receive the remaining claim amount after deducting your loan to the bank.
*Disclaimer:
The documents required may differ from one insurer to another. Please get in touch with your insurance company to get a detailed documentation process.
If somebody else drives your car and runs into an accident until your car becomes a total loss, can you make an insurance claim?
Yes. Whether an accident is caused by you or somebody else who drives your car, you can claim on your insurance.
However, if the driver is not named in your insurance policy or if you do not have all driver coverage, you will first have to pay a compulsory excess of RM400 to your insurer.
Choose the best car insurance
In conclusion, if your car runs into an accident that your car becomes irreparable or that the estimated repair cost exceeds your car’s actual cash value, it means that your car is a total loss.
If a comprehensive policy covers your vehicle, you can at least claim compensation from your insurance company. It is painful to imagine that you have to continue paying your bank loan when your car is no longer usable. If you get a comprehensive policy, you can at least get some compensation that you can use to pay your loan.
If you want to renew your car insurance, use Bjak to renew your car insurance online. Compare up to 15 insurance companies and secure the best plan. Start by getting free car insurance quotes at Bjak in just 3 minutes.
