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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Non-Life Insurance Products

Caselet: Mr. Kulkarni's car has an Insured Declared Value (IDV) of Rs 6,00,000. After an accident, the car is declared a constructive total loss because repair cost exceeds 75% of IDV. Which statement is correct regarding the claim settlement under a standard comprehensive motor policy?

The claim is settled on a total loss basis using IDV, less deductibles and the salvage value if the insured keeps the wreck. The insurer does not pay repair costs beyond IDV or a new car price under a standard policy.

  1. ASettlement is on total loss basis, based on IDV less the applicable salvage value and deductibles, if the salvage is retained by the insuredCorrect
  2. BThe insurer pays the full repair cost regardless of IDV
  3. COnly third-party liability is payable, since own damage cover is lost
  4. DThe insurer pays the market price of a new car

Explanation

In total or constructive total loss, own damage claims are settled on the basis of IDV, with deductibles and salvage adjusted if the insured retains the wreck. Repair cost above IDV is not paid, and new-car price is only available under special add-ons.

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