Constructive Total Loss

DEFINITION of 'Constructive Total Loss'

A constructive total loss is an insurance term where the cost of a repair for an item (e.g., house, boat or car) is more than the current value of that item. It can also refer to an insurance claim that is settled for the entire amount of a property on the basis that the cost to repair or recover the damaged property exceeds its replacement cost or market value.

BREAKING DOWN 'Constructive Total Loss'

Constructive total loss for a vehicle means that the damage is so extensive that repairs would equal or surpass the cost of the vehicle or its insurance limit. This type of loss is common in a head-on collision or total wreck.


For a home, it is common when a home is destroyed by a serious fire or other severe calamity. In cases where the property is damaged to the point where it is considered a constructive total loss, the insured could potentially allow the insurer to assume all rights over the material good.

RELATED TERMS
  1. Fire Insurance

    Insurance that is used to cover damage to a property caused by ...
  2. Actual Total Loss

    A loss that occurs when the insured property is totally destroyed ...
  3. Actual Cash Value

    The amount equal to the replacement cost minus depreciation of ...
  4. Abandonment Clause

    A clause in a property insurance contract that, under certain ...
  5. Contractors' All Risks (CAR) Insurance

    An insurance policy that provides coverage for both damage to ...
  6. Ultimate Net Loss

    A party's total financial obligation when an insured event occurs. ...
Related Articles
  1. Personal Finance

    The Importance Of Property Insurance

    Property insurance is important, but there's a lot you need to learn in order to get the proper coverage.
  2. Personal Finance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  3. Personal Finance

    How Car Insurance Companies Value Cars

    Learn the methodology used by car insurance companies to value cars, and understand why the amount they give you may not cover the cost of a similar vehicle.
  4. Personal Finance

    How to Shop for Home Insurance

    Tips for getting the best protection for your place and possessions.
  5. Personal Finance

    The Beginner's Guide To Homeowners' Insurance

    Discover everything new homeowners need to know before they sign on the dotted line.
  6. Personal Finance

    What Is And Isn't Covered By Homeowners Insurance

    Understanding what your insurance covers can be confusing. Learn what almost all insurance policies have in common.
  7. Personal Finance

    Millennials Guide: Picking the Right Car Insurance

    Millennials fall into the category of high car-insurance rates. Check out some of the ways to save money, like owning an older car or leasing a vehicle.
  8. Personal Finance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.
  9. Personal Finance

    The Best Way to Insure Your Jewelry

    What you need to know to keep those baubles, bangles and beads safe.
  10. Personal Finance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
RELATED FAQS
  1. What's the difference between renter's insurance and homeowner's insurance?

    Renters insurance and homeowners insurance offer similar benefits for occupants and homeowners, but in different ways and ... Read Answer >>
  2. How does the 80% rule for home insurance work, and how do capital improvements affect ...

    The 80% rule refers to the fact that most insurance companies will not fully cover the cost of damage to a house due to the ... Read Answer >>
  3. Does renters insurance cover water damage?

    Learn how renters insurance provides personal property coverage for items damaged by water only if the water is the result ... Read Answer >>
  4. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  5. What are some examples of industries that practice price discrimination?

    Understand the various types of insurance coverage offered in the insurance marketplace, and learn why each policy should ... Read Answer >>
  6. Does renters insurance cover theft?

    Learn how a renters insurance policy provides worldwide theft coverage of your personal property and how to document items ... Read Answer >>
Trading Center