Under What Circumstances Can a Vehicle Be Declared a Total Loss?
1 Answers
Vehicle total loss is divided into two scenarios: one is actual total loss, meaning the vehicle is completely destroyed and cannot be repaired; the other is constructive total loss, meaning although the vehicle can still be repaired, the repair cost reaches or exceeds the actual value of the vehicle, making the repair worthless and unnecessary, thus it can be treated as a total loss. Additional information: 1. Loss calculation after total loss: According to the conventional formula, the loss amount of total loss = [New vehicle purchase price at the time of the incident - Market price of undamaged new parts] × (1 - Depreciation period × Depreciation rate) - Residual value. The new vehicle purchase price here includes the vehicle purchase tax, so the new vehicle purchase price at the time of the incident = Market price of a similar new vehicle model at the time of the incident × (1 + Vehicle purchase tax). 2. Deduction for undamaged parts: Only when the damaged vehicle has been rescued and is deemed a constructive total loss will large undamaged parts be deducted. If only small-value undamaged parts remain, they are generally included in the residual value and deducted together. In the case of an absolute total loss, the undamaged parts are zero. 3. Residual value: Refers to completely unusable scrap parts, deducted at the price they can be sold for. The ownership of the residual value is determined through negotiation between the two parties involved in the insurance. If it is assigned to the policyholder, the residual value is subtracted from the loss assessment; if it is reclaimed by the insurance company, the residual value is not subtracted. 4. Depreciation rate: Current policy terms specify a monthly depreciation rate, clearly stating depreciation according to the monthly rate and noting that the maximum depreciation amount should not exceed 80% of the new vehicle purchase price. A common point of contention here is that the annual depreciation rate calculated according to the current policy's monthly depreciation rate is generally higher than the annual depreciation rate calculated based on the national vehicle scrappage regulations.
