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. Insurance Tips For Homeowners
    Insurance

    Insurance Tips For Homeowners

  2. Understanding Your Insurance Contract
    Insurance

    Understanding Your Insurance Contract

  3. 15 Insurance Policies You Don't Need
    Insurance

    15 Insurance Policies You Don't Need

  4. 5 Insurance Policies Everyone Should ...
    Home & Auto

    5 Insurance Policies Everyone Should ...

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center