Total Loss (Totalschaden)

Concept

A total loss occurs when an insured object is completely destroyed or irretrievably lost as a result of a loss event (an actual total loss), or when repair, while technically possible, is no longer economically reasonable because the repair costs exceed, or come close to, the object’s replacement value (a constructive/economic total loss).

Relevance in Motor Insurance

In motor insurance, an economic total loss is assumed where the repair costs exceed a certain percentage of the vehicle’s replacement value; in this case, the indemnity is generally calculated as the difference between the replacement value and the salvage value of the damaged vehicle, which remains with, or can be disposed of by, the policyholder.

Relevance in Property Insurance

In property insurance, particularly building and household contents insurance, a total loss generally results in payment of the full agreed sum insured, or of the actual cash value or replacement value of the destroyed property, depending on the valuation basis agreed in the contract; where underinsurance exists, the indemnity is reduced in accordance with the proportionality rule.