Definition
Total Loss
Total loss in motor insurance is when a vehicle is stolen or damaged beyond economical repair, triggering settlement at the Insured Declared Value.
A constructive total loss is declared when repair costs exceed a high percentage (commonly around 75%) of the IDV, while a stolen and unrecovered vehicle is an actual total loss. In either case the insurer settles at the IDV, less any compulsory deductible and salvage value where applicable.
For total-loss settlement, the owner usually transfers the vehicle's ownership and documents to the insurer. Because the payout is capped at the IDV, setting a realistic IDV at renewal directly determines the recovery a total loss will provide.
Related terms
- Own-Damage CoverOwn-damage (OD) cover compensates for damage to or loss of the insured's own vehicle from accidents, theft, fire and natural calamities.
- IDV DepreciationIDV depreciation is the standardised reduction in a vehicle's Insured Declared Value applied each year to reflect age-based loss in market value.
- Insured Declared Value (IDV)IDV is the current market value of a vehicle fixed at policy inception — it is the maximum amount a motor insurer will pay if the vehicle is stolen or written off as a total loss.
Plain-English explainer from Investdesk Investors Encyclopedia. General information, not financial advice.