How Constructive Total Loss is Calculated in Motor Insurance

How Total Constructive Loss is calculated?

Though you love your vehicle very much and protect it against any damaging contingencies, there are instances when your vehicle is damaged beyond repairs. What do you do in such situations? Do you get your vehicle repaired or do you replace your totaled vehicle with a new one?

Though a comprehensive motor insurance policy covers the repair costs incurred in case your vehicle suffers damages, there is a concept of Total Constructive Loss or Constructive Total Loss. Do you know what it means?

Total Constructive Loss: Total Constructive Loss comes into play when the repair costs of the damaged vehicle exceed 70% or 75% of the Insured Declared Value (IDV) of the vehicle. In these situations, the insurance company believes that paying for the repair costs is not wise and declares the claim to be a Total Constructive Loss.

What happens in case of a Total Constructive Loss?: If your claim is declared as a Total Constructive Loss, the insurance company would pay the Insured Declared Value (IDV) of your vehicle after deducting the estimated wreck value or scrap value. The scrap value is the estimated price that can be earned by selling off the damaged car and its parts as scrap. Thus, the claim payable in case of Total Constructive Loss = IDV of the vehicle in the year of the damage – wreck value.

Things to remember if your vehicle qualifies for Total Constructive Loss: It is always advisable to sell off your damaged vehicle and replace it with a new one if a claim for Total Constructive Loss is declared on the vehicle. However, you can get the vehicle repaired if you want. The insurance company would pay the Total Constructive Loss claim and would be free from any further liability on the vehicle. After you have gotten the vehicle repaired, you would have to fulfill two responsibilities which are as follows:

• You have to get a certificate of roadworthiness from the RTO to use your repaired vehicle on Indian roads.
• You would then have to get a fresh vehicle insurance policy. However, when applying for a fresh policy, you should mention to the insurance company that a Total Constructive Loss claim had been incurred on the vehicle in the past. The insurance company might then allow you a fresh policy.

Thus, to summarize, Total Constructive Loss is considered in those claims when the repair cost of the damaged vehicle exceeds 70% or 75% of the vehicle’s current IDV. In case of Total Constructive Loss, the insurance company pays the IDV of the vehicle after deducting the estimated wreck or scrap value of the vehicle.

So, when your vehicle is damaged badly and your insurance company calls it a Total Constructive Loss, know what it means, how it is calculated, and what claim is payable so that you wouldn’t face any surprises.