When nature throws cold water on your drive

The recent floods in India have led to an increased interest in questions relating to flood-hit vehicles

Around this time three years ago, many residents of Chennai were at their wit’s end, figuring out what to do with their cars standing helplessly in dashboard-high floodwaters. In a knee-jerk reaction, a good number of them started the engines, which is like signing a car’s death warrant. Every car insurance policy document sounds a warning against this panic reaction.

“Honestly, back then, I was not aware of this . Fortunately, I did the right things more by instinct than knowledge. I left my two flood-hit cars alone and called the insurance company immediately and chose to be patient. The cars were declared ‘total loss’. By the end of December, I got my insurance settlement. Both my cars had bumper-to-bumper insurance and I got their market value,” recalls Rammohan Thyagarajan, on the third anniversary of the 2015 Chennai floods. For many vehicle owners in Chennai, that was an eye-opener, as I am sure this year’s Kerala floods has been for those there. I asked Vignesh V Ramakrishnan, founder of CarPal, an online car-buying platform, to respond to three questions about flood-affected cars.

Do pre-owned cars from flood-affected areas come with a stigma affecting their value?

From a general perspective, a pre-owned car from a recently flood-affected city does raise some flags to buyers initially. Dealers too are alert not to get misled by cars that come their way. Most local savvy buyers cross-reference the RTO zone in the registration number. There are always some tell-tale signs that indicate whether the car had been flooded — be it the exteriors, how the steering feels when you drive, or even the abnormal friction/sound from the engine and bearings.

Used-car dealers generally run a service-history check based on the registration number as well, which would help verify if there were any insurance claims made. But once the car is proven to be a clean one, the price is fair.

You may also have to take into account the overall sentiment of the market immediately after a flood.

When should you push for a ‘total loss’?

Pushing for a total loss is an ideal step in case of extensive structural damage, where the build integrity of the car has been compromised, or even flooding after which the car just can’t be brought back to normal. But before pushing for it, it is important to have an understanding of your car’s Insured Declared Value (IDV). The IDV is the pivot.

Typically, most insurers declare a total loss if their liability (after taking depreciation of replaceable parts into account) goes beyond a tipping point of 75% of the IDV. The covers you have would matter in this case too. If you own a car that is fairly old, pushing for total loss would be beneficial, as the IDV would have depreciated to smaller value over all those years of ownership, while the service and spare part costs would have risen in value.

What are the must-have covers in a car insurance policy?

December 2015 clearly taught us how not to be ignorant when it comes to insurance covers. While the negotiation for the premium is always persistent, one shouldn’t compromise on the covers but simply ask for a higher ‘Own Damage’ discount that insurers can modify based on their past claim experiences.

There are some covers that have proved their mettle post the 2015 experience and have now made it to most buyers’ preferences. Zero Depreciation Cover (street name — bumper-to-bumper insurance) ensures that the parts’ depreciation is waived off. This way, you don’t pay out of your pocket apart from the minimum deductible. There’s also Engine Safe Cover that supports in a situation where you start an engine which had water ingression. Return To Invoice (RTI) is a cover that is gaining popularity too. RTI helps you in covering the gap in value between the IDV and the invoice cost of the vehicle. While the covers are great to have, they come at a small premium and have their own limits of relevancy based on your car’s age.

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