What is meant by constructive total loss in car insurance policy?

Technically, a vehicle is declared as a total loss when the cost to repair the vehicle to its pre-damaged state exceeds the cost of the vehicle’s worth. The first thing to note is, a total loss can occur in two situations – car theft or a car accident where the car is damaged to such an extent that it is not in a usable condition anymore.

If a motor vehicle has been destroyed or has been rendered permanently incapable of use, the owner shall, within fourteen days, report the fact to the registering authority. You need to submit the registration card (RC book) and get the registration of your vehicle canceled.

A vehicle is termed as a total Loss only if the cost of repairing damages is more than 75% of the Insured Declared Value (IDV). IDV is the approximate market value of your vehicle. When the cost of repairs exceeds 100% of its current market value it is termed as Constructive Total Loss. In both cases, the insurer pays the car owner with the amount equal to the IDV.

For example, if the cost of a 2-year old vehicle was Rs. 5 lakhs at the time of purchase. In case of total loss, you can claim around Rs. 3.5 lakhs from the insurance company, depending on its current IDV value.

Total loss is not a pretty situation to be in. But your insurer will certainly do their best to cover you for the loss. So, get your vehicle covered with comprehensive car insurance and save yourself from a complete monetary loss.