Total Loss

A Total Loss, sometimes called a write-off, is a situation where the damage and repair cost of a property exceeds its insured value and it becomes more cost-effective to purchase or construct a new replacement. This term is frequently heard in auto insurance, where a vehicle being “totaled” occurs in roughly one in seven auto accident claims.

A Constructive Total Loss occurs when damage to a covered property only amounts to a partial loss per se but the cost of restoring it’s pre-loss condition outstrips the value of the property so as to make it financially imprudent to do so. For example, a detached garage damaged by a fire might still have a serviceable frame and foundation, but if it would cost $25,000 to repair it when the actual value of the garage was only $20,000, it would be classified as a constructive total loss and the coverage would go towards constructing a new garage in its place.