Motor Insurance Constructive Total Loss Explained

A motor insurance claim can either be cashless or reimbursed.

A cashless claim is when you take your damaged vehicle to a network garage, pay the deductibles and feel relaxed, as your general insurance company will pay the rest of the repair/replacement cost. On the other hand, a reimbursement motor insurance claim is the process where you pay for the expenses incurred to repair your damaged vehicle and submit the repair bills to your insurance company, who will then reimburse the same to you, excluding the deductibles.

So, amongst these two categories, where does constructive total loss fit in?

Sometimes an accident might leave your vehicle in a severely damaged state. In such cases, it becomes impossible to repair the damages done to your vehicle and the motor insurance claim made by you is declared as constructive total loss.

Once you file a motor insurance claim, your insurance company appoints a surveyor, who inspects the damage done to your vehicle. If the surveyor declares that the repair cost of the vehicle exceeds 75% of the IDV (Insured's Declared Value) of your vehicle, then it is declared a CTL (Constructive Total Loss).

The cost of repair of your vehicle goes beyond its IDV or its insurance limit usually when it is involved in very severe accidents such as head-on collisions or complete wreckage. Thus, in such scenarios the claim made by you towards your motor insurance is considered for constructive total loss.

What happens when the motor insurance claim is declared CTL?

Once the claim is registered as constructive total loss, you need to surrender your vehicle to your insurance company. You no longer own your vehicle and its ownership is transferred to the insurance company.

Your insurance company pays you the IDV of your vehicle after subtracting the excess (deductibles) from your policy. Please take a note that your insurance policy will be cancelled after the claim settlement. You are not required to pay any premium towards your cancelled insurance policy once you receive the final settlement.

What is the difference between total loss and constructive total loss?

If your vehicle has been damaged to an extent that it cannot be restored to its pre-loss condition, then it is deemed as total loss. However, if the vehicle is damaged but it can be repaired, but the repair cost surpasses the IDV of the vehicle by 75%, then it is constructive total loss.

In case of constructive total loss, the repair cost of the vehicle is so high that it is cheaper to buy a new vehicle instead of spending the money to repair the damaged one. Whereas, in case of total loss, there is no chance that the damaged vehicle can be repaired at all.