There is no doubt that most people hope that they will never have to use their car insurance. It is unfortunate, but accidents do happen from time to time. Sometimes, these accidents result in the total loss of a vehicle. What exactly does a “total loss” mean, and how does this differ from a “constructive total loss”? In this article, we’ll explain everything you need to know about a constructive total loss in auto insurance.
What Is a Constructive Total Loss?
The term “constructive total loss” can also be referred to as a “virtual total loss” when the actual cost of repairing a damaged vehicle exceeds the real cash value. As a result, if the car’s repair cost is more than the vehicle’s value, the insurance company may consider it a constructive total loss. Suppose you’ve been in an accident with your car, and the damages are at RM60,000. However, after conducting market research, the insurance company determines that the vehicle is worth RM50,000. If this were the case, the insurance company would consider the car a constructive total loss, mainly because the repair cost exceeds the vehicle’s value.
What Is The Importance Of Understanding Constructive Total Loss?
Understanding constructive total loss is crucial because it can affect the compensation you receive from your insurance company. If the insurance company declares your car to be a constructive total loss, then you will only receive the car’s actual cash value minus any deductibles you may have. In other words, if the actual cash value of your car is RM50,000, you would only receive that amount minus any deductibles you may have to pay. It is important to remember that your car’s actual cash value may be less than what you paid for it or less than what you still owe on it. As a result, you may be in a difficult financial situation, especially if you still have a car loan to pay.
If Your Vehicle Has Been A Loss, What Should You Do?
If your car is declared a constructive total loss, a few options are available. It is possible to:
- Accept the insurance company’s compensation and buy a new vehicle with it
- Keep the car and reject the payment, but you’ll need to pay for the repairs
- Check with the insurance company to see if an increase is possible.
Remember that the insurance company’s offer may be less than what you expected or less than what you owe on your loan. The best action in these situations is to consult a lawyer or an expert to understand your rights and options before deciding.
Final Thought
Damaged vehicles are constructive total losses when repair costs exceed cash value. A clear understanding of this concept is essential since it can affect the compensation you receive from your insurance company.
Suppose your car is declared a constructive total loss. In that case, you have several options, including accepting the compensation, rejecting it, and keeping the car, or negotiating with the company to increase the offer. Consult an expert before making a decision. Lastly, always drive safely and be prepared for the worst, but always hope for the best.
