A scrapped car is an immensely damaged car, which cannot be repaired. A scrapped car is only valued for the weight of its materials like the frames, rubber from their tires, etc.
The new vehicle scrappage policy has laid down general guidelines on how old cars will be scrapped or abandoned. Also known as the Voluntary Vehicle-Fleet Modernisation Programme, old cars will have to undergo a mandatory compatibility/fitness test. Those who pass this test can be re-registered and those who fail have to go through the process of scrapping.
As per the current motor laws, a personal car has a life of 20 years, and a commercial one has a lifespan of 15 years. Under the new policy, a 15-year old car will now require a valid fitness certificate to renew the registration certificate for another five years.
The vehicle scrappage policy will assist in phasing out old, useless, and unfit vehicles. The policy will come into effect immediately after the registration period of the car is over.
Yes, scrapping a car will impact the car insurance policy. An old and unfit car not only contributes to environmental degradation but is also dangerous to drive. As a result, it increases the liability of the motor insurance companies and they charge a higher premium to car owners. But when if your car is scrapped, you no longer have to pay a high premium for your car insurance policy. You can use a car insurance calculator to check the estimated premium for renewing your old car.
Besides, an old and unfit car also leads to a higher Incurred Claim Ratio of the insurer. An ICR is a ratio of the total value of claims settled versus the total premiums obtained in the year. Several car owners check the ICR of a motor insurance company while buying the policy and go for the one with a high ICR. But the ICR decreases with a scrapped car. Thus, it will help you make a better decision while buying your car insurance policy.
Moreover, car manufacturers have access to recyclable materials from the scrappage of unfit cars. By using these materials, they can lower the manufacturing cost of the vehicle. With the decreased prices of new cars, their insurance costs will also reduce as the Insured Declared Value (IDV) helps to determine the premium. In case you wish to know the IDV of your car, you can do so with the help of an IDV calculator.
A totalled car refers to a four-wheeler whose repair costs is more than the market value of the car. When your car is totalled in an accident, the motor insurance company will offer to buy the car from you. If your car is scrapped, the insurance company will pay you the value of the car along with the amount that they received from the junkyard.
But when you choose to keep your totalled car instead of scrapping it, you will get a lesser amount because it will not include the value of the junk metal. Hence, scrapping your totalled car can help you to get a higher claim amount from your insurance company.
Let us understand this concept with an example-
Mr. Y's car was damaged adversely in an incident and the cost of repairing the vehicle is more than its IDV. In this case, the insurer will pay full IDV as a claim amount to Mr. Y while buying the totalled car. But if Mr. Y agrees to get his car scrapped, he will get the IDV plus the scrap value of the car from the insurance company.
As per the Indian motor laws, it is mandatory to cancel the Registration Certificate (RC) of your car before scrapping it. After your vehicle is scrapped, you should also cancel your car insurance policy. It helps to prevent the misuse of your car documents and theft. The policy premium will be refunded on a pro-rata basis. However, you cannot cancel the policy if you had raised a claim in the current policy year.
According to Section 55 of the Motor Vehicles Act, 1988, the car owner is responsible for cancelling the RC in cases of total damage. It helps to keep a track of the vehicles that are no longer in use. The RC is of a car does not change with the ownership of the car. Hence, cancelling the RC means the car is scrap and unusable.
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In India, car scrapping is an authorized activity since old cars have been significantly contributing to environmental degradation. The Regional Transport Offices (RTOs) have closed the re-registering window for old vehicles and are doing their fitness test as per the new vehicle scrapping policy. If your car is declared unfit for use, do remember to inform your motor insurance company before getting it scrapped.
However, car owners can also sell or transfer their cars to a neighbouring state before the Registration Certificate (RC) expires. After the transfer, they can re-register the car at the new RTO. The re-registration details of the car have to be updated and maintained in the old RTO as well.
Scrappage of unfit and old cars is compulsory in India. It is not only more beneficial to scrap an unfit car but also safer than using it on the road. You can also avoid all complexities involved in the car’s transfer to another RTO. So get your car tested for fitness and then, scrapped if declared unfit for use.
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