What Does Total Loss Mean?

[LePiper]

Total loss refers to the complete loss of the insured goods, which can be categorized into actual total loss (Actual-Total-Loss) and constructive total loss (Constructive-Total-Loss). Below is a detailed explanation of the two: Actual Total Loss: Also known as absolute total loss, it refers to the complete destruction of the insured property in terms of physical form or economic value. For example, if a car undergoes a severe collision that results in significant damage to the engine and cabin, it can be defined as an actual total loss. Constructive Total Loss: This occurs when the insured property is not completely destroyed and can be repaired or recovered, but the cost of doing so would exceed the value of the property after recovery, making it not worthwhile. In such cases, the insurance company may abandon efforts and compensate the insured with the full insured amount, which is considered a constructive total loss.