Vehicle Scrapping for Insurance Claims: Everything You Need to Know

Have you ever wondered what happens to your car when it reaches the end of its life or gets badly damaged in an accident? Most people think it’s just the end of the road—but that’s where vehicle scrapping and insurance claims come into play. In India, the government has introduced proper guidelines for scrapping old vehicles, and insurance companies have also stepped in to support owners during this phase.

So if you’re planning to scrap your old four-wheeler, or maybe your car was damaged beyond repair in an accident—this guide is for you.

Understanding Vehicle Scrapping in India

Vehicle scrapping basically means permanently removing a vehicle from the road due to age, damage, or non-compliance with pollution norms. According to the new Vehicle Scrappage Policy 2021, private vehicles older than 20 years and commercial vehicles older than 15 years will need to undergo fitness tests. If they fail, it’s time to scrap.

The Indian government estimates that over 1 crore vehicles are currently eligible for scrapping due to age and non-compliance. This has given rise to many car scrap companies in India, including authorized centres in cities like Ahmedabad, Delhi, Mumbai, and Chennai.

Insurance Categories Relevant to Scrapping

Let’s talk insurance—because it matters big time when you’re dealing with a damaged or end-of-life vehicle.

There are mainly two terms you’ll hear:

• Total Loss: If repair costs exceed 75% of the car’s IDV (Insured Declared Value), it’s declared total loss.
• Constructive Total Loss: The car isn’t completely destroyed, but repairs would cost more than it’s worth.

In both cases, insurance companies may offer a claim, and then you can go for scrapping.

When Can You Scrap a Vehicle for an Insurance Claim?

1. After a major accident: If your car is severely damaged, your insurer might label it a total loss.
2. After floods or fire: Natural disasters often lead to scrapping claims.
3. After 15-20 years of use: Many cities including Ahmedabad now restrict the use of old, polluting vehicles.

In any of these situations, you can approach your insurer and then begin the scrapping process.

The Process of Claiming Insurance After Scrapping

It may sound complicated, but it’s actually quite manageable if you follow these steps:

1. Inform the Insurance Company immediately after the damage or when deciding to scrap.
2. Get a Survey Done: The insurer will send someone to inspect and evaluate the car.
3. Obtain a Valuation Report: This shows how much the car is worth in its damaged condition.
4. Submit the Required Documents (we’ll talk about that next).
5. Submit the Scrapping Certificate to the insurer.
6. Get Your Claim Settled: Usually within 7–14 working days if all goes smoothly.

Documents Needed for Vehicle Scrapping and Insurance

To avoid delays, make sure you have:

• RC (Registration Certificate)
• Insurance papers
• Owner’s PAN/Aadhar card
• FIR (if car damaged in accident)
• Vehicle fitness certificate (if applicable)
• Scrapping certificate from an authorised centre (especially in cities like Ahmedabad)

How to Obtain a Vehicle Scrapping Certificate

Only Registered Vehicle Scrapping Facilities (RVSFs) can issue a valid scrapping certificate in India. These centres are approved by the government and follow proper recycling norms.

In Gujarat, particularly Ahmedabad, there are certified car scrap companies that handle everything from deregistration to documentation. Always ask for the scrapping certificate, as it’s a mandatory proof required by insurance companies for claim settlement.

What Happens to the Insurance Policy After Scrapping?

Once your car is scrapped:

• You can cancel the policy and apply for a refund on the unused premium.
• If you’re buying a new car, you can transfer your No Claim Bonus (NCB) to the new policy.

So even though your old car is gone, your bonus and benefits aren’t!

Scrap Value and Its Role in Insurance

One big confusion people have: who gets the scrap value—the car owner or the insurance company?

Here’s the deal:

• If the insurer settles a total loss claim, they might keep the car and scrap it themselves (you get the full IDV minus deductible).
• If you scrap it yourself and share the certificate, the scrap value may be deducted from your insurance payout.

For instance, if your car’s IDV is ₹3 lakh and the scrap value is ₹50,000, you may get ₹2.5 lakh from the insurer.

Tip: Always ask your insurer how they’ll handle the scrap value before submitting documents.

Common Mistakes to Avoid During Insurance Claim

• Don’t scrap the car before the insurance survey is done.
• Always deal with authorised RVSFs, not unregistered dealers.
• Keep a copy of all submitted documents, including scrapping certificate and claim forms.
• Notify your insurer before surrendering the RC or plates.

Real-Life Example: Car Scrap in Ahmedabad

Mr. Ramesh, a resident of Ahmedabad, had a 17-year-old Maruti Zen that failed the fitness test. He contacted a car scrap company in Ahmedabad, got a valuation certificate, and handed over the RC and documents. With proper paperwork, his insurer processed a total loss claim, and he received ₹1.6 lakh within 12 days. The scrapping certificate was also accepted by the RTO, and his RC was deregistered successfully.

Conclusion: Be Smart, Save Time & Money

Scrapping your car and claiming insurance doesn’t have to be a headache. With the right documents, authorised car scrap companies in India, and timely communication with your insurer, the entire process can be smooth and profitable.

👉 Pro Tip: If you’re based in Gujarat, especially Ahmedabad, choose MKP Kataria Pvt. Ltd for a legal and beneficial process.