Total Loss & Constructive Total Loss
Did you know that the Motor Insurance application has magic words in it?
Page 2 of the motor insurance application has the words “Total Loss and Constructive Total Loss”.
The wording for this is as follows:
“The schedule of age-wise depreciation as shown alongside is applicable for the purpose
of Total Loss/ Constructive Total Loss (TL/CTL) claims only.”
Page 2 also gives the age-wise depreciation schedule.
If you paid somebody, who in return promises to explain and do everything as agreed, but in reality, he does not – What would you call such a person? How would you describe him? Wouldn’t you call him a thief?
Perhaps, in a similar manner motor insurance companies never explain anything!
People often have no understanding of the concept of Total Loss and Constructive Total Loss.
As uneducated truck driver living hand to mouth opts to insure his truck because it is compulsory! Otherwise, he would not have cared to! Having paid a whopping Rs 50,000 towards premium for comprehensive motor insurance, he still does not know what the words “Total Loss and Constructive Total Loss” mean.
The proposal form does not define these terms.
The policy document, which can only be made “available on request” during the application, can be received only after paying the premium does not talk about Total Loss. It only explains Constructive Total Loss.
Well, who is going to explain the meaning of these words to this truck driver?
Total Loss – Total loss is a condition of real and personal property when it is damaged beyond repair. For example, in motor insurance when a car meets with an accident and is damaged to pulp, then that situation is called as total loss. It is beyond repair. Under those circumstances the insurance company will pay the total value of the vehicle to the owner.
Constructive Total Loss (CTL) – It is a partial loss of such significance that the cost of restoring the damaged property will exceed the value after restoration. For example, a car met with an accident. The value of the car before accident is Rs 10,00,000. The damage in the accident necessitates to spend 75% of the value of the car. Under these circumstances the insurance company would say that this vehicle is considered as constructive total loss. This definition is stated in the policy wording.
People generally congratulate someone when they buy a new vehicle. But looking at the state of motor insurance policy, we cannot help but pity the buyer who would be driving into the unknown!
This blog post is brought to you by the minds at insurancepe!
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