Constructive Total Loss
Categories: Company Management, Financial Theory
You've been sitting in traffic for 30 minutes while rubberneckers eye an accident on the side of the road. When you pass it, you take a minute to look. The car has smashed into a wall. Its front end is crushed. Its axle has cracked in half. And the windshield looks like an accordion.
This car is totaled.
The insurance term you’re looking for, however, is a constructive total loss. This means that the damage to the car is so significant that its repair costs would surpass the actual cost of the vehicle, or the value of its insurance policy.