When you purchase an insurance policy, understanding some of the insurance terminologies can be difficult. While filing a claim, it is important to know and understand these terms properly. Let us look at the concept of total loss in a car insurance policy. Also, understand how the insurer calculates it.
What is ‘total loss’ in car insurance?
A total loss in car insurance occurs when the repairing cost of the damages is more than the vehicle’s worth. Total loss in car insurance can occur in two scenarios: in case of car theft or an accident leading to damage of a car beyond usage.
What is a constructive total loss?
A constructive total loss means that the vehicle has suffered extensive damages for which the repair cost may exceed the car’s Insured Declared Value (IDV). In some cases, the repairing cost for the total loss of the vehicle may even exceed the insurance limit. Mostly this type of loss occurs in a head-on collision or if the car suffers a total wreck.
How is a total loss in car insurance different from a constructive total loss?
Total loss in car insurance accounts when the repairing cost exceeds 75% of the car’s insured declared value or market value. In case of a constructive total loss, the repairing cost for damages that occurred may exceed 100% of the car’s IDV. Sometimes this value may exceed the coverage limit of the car insurance as well.