Motor Insurance Constructive Total Loss Explained

Updated On Oct 14, 2023

Constructive Total Loss is extensive damage incurred by the vehicle for which repair liability exceeds 75% of the IDV of the vehicle. Find all you need to know about a constructive total loss.

What Is Constructive Total Loss?

A car’s Constructive Total Loss (CTL) signifies inclusive damage sustained by the vehicle which amounts to repair cost that equals or surpasses the insured cost of the vehicle. Basically, if the liability of the car insurance company exceeds 75% of the IDV of the vehicle, it is called a constructive total loss. However, the CTL is often incurred in situations of head-on collisions, which is generally suffered by one in around seven car accidents. When the insurer’s repair liability exceeds 75% of the IDV of the vehicle, then the insurance claim is settled based on total loss concept.

Types of Car Insurance Claims

Car insurance includes two types of insurance claims, which are as follow:

1. Third Party Insurance Claim

The third-party car insurance plan is an agreement between an insurance company and policyholder, where the insurer promises to compensate the policyholder’s financial liability incurred towards a third party for injuries, disability compensation, death or property damage caused due to an accident with the insurer vehicle. If a third party has suffered due to an accident with your vehicle, you should immediately convey it to the police and your insurer. Whereas, if you are the third party, then you must own all the information and details pertaining to the insured vehicle and claim the incident ahead.

2. Own-Damage Insurance Claim

The own-damage car insurance plan is an agreement between an insurance provider and policyholder, where the former promises to cover the insured vehicle of the latter if it gets damaged in an accident or stolen. In the case of an accident, the policyholder must try to click photos and shoot video of the spot and vehicle and immediately report to police and insurance companies at the earliest. Also, in case of theft, you need to inform the police and insurer and should be ready with all the necessary details as delay in intimating about a theft claim can even get your claim rejected.

Where Does Constructive Total Loss Fit In?

The constructive total loss can be claimed for a third-party insurance claim as well as an own-damage insurance claim. The CTL is applicable in accidents that cause severe damage to your vehicle which can cost the liability on repairs more than 75 percent of the Insured's Declared Value . For such claims, a surveyor comes to inspect the vehicle damages and tries to measure the incurred loss before declaring it a constructive total loss.

What if the Car Insurance Claim Is Declared Constructive Total Loss?

When it comes to situations where the insured vehicle sustains severe damages and its repair costs more than 75 percent of the Insured Declared Value (IDV), the policyholder declares it a constructive total loss. In such cases, the ownership of the vehicle is transferred to the insurance company and you are required to surrender the keys of the vehicle and documents to the insurance company. After this, the insurance company pays the insured declared value to the policyholder after making a deduction for excess expenses. Once the claim settlement is completed, the insurance plan will automatically expire and you need not pay its premiums anymore.

How Constructive Total Loss Is Different From Total Loss?

In car insurance, the total loss is declared when a vehicle is damaged to an extent of beyond repair. It means that the vehicle could not be restored to the condition as it used to be before the accident. On the other hand, a constructive total loss is stated when the vehicle is damaged severely and can be repaired to its previous condition but the liability on repairs will be exceeding 75% of the IDV of the vehicle. In such conditions, the insurer examines the damages and accesses the cost of damage repairs. Under the situation of a constructive total loss, the repair would cost much higher than the costs of buying a new one.