Actual Total Loss

Actual total loss is a loss that occurs when the insured property is totally destroyed or damaged in such a way that it can be neither recovered nor repaired for further use, or the insured is irretrievably deprived of it. This could happen as the result of a theft, natural disaster or accident of some sort. Usually, an actual total loss indicates the maximum settlement possible according to the terms of the insurance policy. Actual total loss can be contrasted with constructive total loss, which occurs when a property is technically only partly damaged but increasing damage seems unavoidable or the property has still been rendered unusable and is beyond repair.

Actual total loss is also known as "total loss." Sometimes people will also refer to a piece of property that cannot be salvaged as "totaled."

When an actual total loss occurs, the insured can receive a payout from the insurance company for the insured value of the property. The insurance company may also provide a payout for the insured value of the property in the event of a constructive total loss, which means that the property, although not completely destroyed, is rendered unusable and is beyond repair.

For example, there may be a hurricane heading for the coast of North Carolina. Hurricane Widget is a category 5 storm and has been causing storm surges up to 15 feet high as it travels up the coast. Bob and Sharon have a beautiful house on the beach. After Hurricane Widget travels past, Bob and Sharon no longer have a house on the beach. Now they have stilts on the beach. This is an example of an actual total loss. Kevin and Julie have a house three miles inland. Their house flooded up to the attic and a tree came through the roof. Although the house is still mostly there, this can be considered a constructive total loss, as the structure has been rendered unusable due to damage.