Constructive Total Loss

AAA

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.

INVESTOPEDIA EXPLAINS '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. Waiver Of Coinsurance Clause

    Language in an insurance policy that says the insurance company ...
  2. Aggregate Limit

    A contract provision used in insurance to limit the amount that ...
  3. Mortgage Insurance

    An insurance policy that protects a mortgage lender or title ...
  4. Umbrella Insurance Policy

    Extra liability insurance coverage that goes beyond the limits ...
  5. Insurance

    A contract (policy) in which an individual or entity receives ...
  6. Casualty Insurance

    A broad category of coverage against loss of property, damage ...
Related Articles
  1. 15 Insurance Policies You Don't Need
    Insurance

    15 Insurance Policies You Don't Need

  2. 5 Insurance Policies Everyone Should ...
    Home & Auto

    5 Insurance Policies Everyone Should ...

  3. Insurance Tips For Homeowners
    Insurance

    Insurance Tips For Homeowners

  4. Understanding Your Insurance Contract
    Insurance

    Understanding Your Insurance Contract

comments powered by Disqus
Hot Definitions
  1. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  5. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  6. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
Trading Center