What is Actual Total Loss and Constructive Total Loss?

The actual total loss and the presumed total loss are:

1. Actual total loss means that the subject matter of insurance is lost after the occurrence of an insured accident, or is seriously damaged and completely loses its original shape and utility, or can no longer be owned by the insured and no longer has any commercial value. In the event of an actual total loss, the insured can request the insurer to receive full compensation according to the insured amount without going through any legal formalities;

2. Presumed total loss means that the actual total loss is unavoidable, or the residual value of the damaged goods, if the sum of the costs of rescue, sorting, repairing and onward transportation to the destination exceeds the value of the goods at the destination, it is deemed to have been totally lost. The damage to the insured object is not completely lost, it can be repaired or recovered, but the cost will exceed the value of the insured object after rescue, in this case, the insurance company gives up its efforts to compensate the insured with the full amount of the insured amount is a presumed total loss.

Article 55 of the Maritime Law of the People's Republic of China stipulates that in the international carriage of goods by sea, the amount of compensation for loss and damage to the goods, that is, the amount of compensation for the loss of goods, shall be calculated according to the actual value of the goods; The amount of compensation for damage to the goods shall be calculated according to the difference between the actual value of the goods before and after the damage or the cost of repairing the goods. The actual value of the goods is calculated based on the value of the goods at the time of loading on board the ship plus insurance premiums plus freight. The actual value of the goods provided for in the preceding paragraph shall be compensated for by deducting the relevant expenses that are underpaid or waived due to the loss or damage of the goods.

Maritime Law of the People's Republic of China Article 56 The limit of compensation for loss of or damage to the goods by the carrier shall be calculated according to the number of pieces of cargo or the number of other freight units, and shall be 666 67 units of calculation per piece or other freight unit, or 2 units of calculation per kilogram according to the gross weight of the cargo, whichever is higher. However, unless the shipper has declared the nature and value of the goods before shipment and stated them in the bill of lading, or the carrier and the shipper have separately agreed on a limit higher than the compensation provided for in this article. If the goods are packed in containers, pallets or similar shipping equipment, the number of pieces of goods or other shipping units contained in such shipping equipment specified in the bill of lading shall be deemed to be the number of pieces of goods or other shipping units referred to in the preceding paragraph; If it is not specified, each shipment shall be regarded as one piece or one unit.

If the shipping apparatus is not owned by the carrier or is not provided by the carrier, the shipping apparatus itself shall be deemed to be one piece or one unit.

In ship insurance, actual total loss refers to the complete loss or serious damage of the insured ship after the occurrence of an insured event, and the complete loss of its original state and utility, including the disappearance of the ship. The following three conditions must be met at the same time for the disappearance of the ship: 1. The ship is missing during navigation; 2. The crew of the ship and the ship disappeared at the same time; 3. The period of disappearance must be more than six months.

The presumed total loss refers to the total loss that is inferred from the insurer after the insured ship has occurred, and the insurer believes that the actual total loss is unavoidable, or the expenses to be paid to avoid the actual total loss will exceed the insured value of the ship. For the insured to deal with the presumed total loss of the case, the insured first needs to submit an entrustment application, and at the same time, an application for entrustment should be submitted. The insurer has the right to accept the commission or refuse to accept the commission. When the insurer accepts the commission, the ownership of the vessel and the rights and obligations attached thereto are all transferred to the insurer.

When the insurer refuses to accept the entrustment, it does not affect the insurer's handling of the case as a presumed total loss. After the presumption of total loss is paid, the insurer's insurance liability is discharged.

Also known as "absolute total loss", it refers to the actual total loss of the subject matter of insurance. There are four conditions that constitute the actual total loss of the subject matter of marine insurance:

1) The subject matter of the insurance has been completely lost. For example, a ship sinks to the bottom of the sea due to bad weather or a collision and cannot be salvaged for repair; The goods were completely destroyed by fire or dissolved at sea, etc. However, if the ship sinks after a collision and is subsequently salvaged shortly thereafter, it cannot be included in the actual total loss.

The actual total loss must be the total physical loss of the subject matter of the insurance.

2) The subject matter of the insurance has lost its original use or value. For example, cement has been soaked in seawater to become a hard lump and has lost its original usefulness. After the ship hit the reef, under the action of the waves, it was broken into the shape of a ship. Although the entities of these subject matter still exist, they are no longer able to exhibit the nature or attributes of the original insurance.

In other words, the commercial attributes of the subject matter of the insurance have been completely lost and can no longer be treated as original**.

3) The insured loses ownership of the subject matter of the insurance and cannot recover it. For example, the ship was hijacked by pirates, etc. In such a case, although the subject matter of the insurance actually still exists, the insured has been deprived of ownership of the subject matter and cannot be restored.

4) The ship has been missing for a certain period of time and is still unreported. The so-called "definite period" of disappearance depends on the specific circumstances of the disappearance. If the missing ship is found after the insurer pays the insured for the actual total loss, the insured shall refund the compensation.

Extended information: Actual loss is the actual loss suffered by the subject matter of the insurance itself. It applies to general property insurance for losses caused by an insured event.

Actual losses include damage to the subject matter, loss of the original use and value of the subject matter, and the rights and interests of the subject matter insured by the insurer.

Legal basis: Article 577 of the Civil Code of the People's Republic of China provides that if one of the parties fails to perform its contractual obligations or the performance of its contractual obligations does not conform to the agreement, it shall bear the liability for breach of contract such as continuing to perform, taking remedial measures or compensating for losses.

Actual total loss refers to the complete loss of the insured goods due to natural disasters or accidents during transportation, or completely promote its original role.

Constructive total loss refers to the cost of repairing the damaged goods or the cost of transportation to the destination, which will be the cost of the goods at the destination**.

Presumed total loss refers to a state or degree in which the insured object of the ship, cargo and freight has suffered a partial loss in the event of an insured event, and has not yet reached the actual total loss. The following are presumed total losses:

1) The insured loses the insured's ownership of the ship or cargo, and the insured is unlikely to recover the ship and cargo, or the cost of repossessing the ship or cargo will exceed its value after recovery, depending on the circumstances;

2) In the case of damage to a ship, the cost of repairing the damage exceeds the value of the repaired ship after the insured danger causes damage to the ship. When estimating the cost of repair, the share of the other parties in respect of the repair cost shall not be deducted, and the subsequent salvage cost and the share of the general average payable by the ship if the ship is repaired shall be taken into account;

3) For damaged goods, the cost of repairing the damaged goods and continuing the goods to the destination exceeds the value of the goods arriving at the destination. Actual total loss, also known as "absolute total loss" or "actual average", is also a symmetry of "constructive total loss", that is, the loss of the insured property in material form or economic value.

Extended information: Four scenarios of actual total loss.

1) The subject matter of the insurance has been destroyed, such as the ship and cargo have sunk to the bottom of the sea and cannot be salvaged or the cargo has been destroyed by fire.

2) The destruction of the attributes of the subject matter of insurance, the original commercial value no longer exists, such as the loss of fragrance after tea is soaked in seawater, and the cement becomes lumpy after being soaked in seawater;

3) The insured is no longer able to recover the lost ownership, such as the ship and the cargo** are seized or seized, released indefinitely, or have been confiscated;

4) If the ship has been missing for a certain period of time, if there is no news for half a year, it can be regarded as a total loss. If the insured suffers an actual total loss, the insurer will pay the full amount of the insurance.

The main features of the presumed total loss.

In marine insurance, a presumed total loss is considered to be unavoidable after the occurrence of an insured event, or if the cost to be paid to avoid the actual total loss exceeds the insured value. Its scope is limited to ships and cargo, and the main features are:

1) The presumption of total loss is based on the premise that an insured accident occurs on the ship or cargo, resulting in a partial loss, but the actual total loss has not yet been formed. If the actual total loss has already occurred, or if part of the loss has not yet occurred, the presumed total loss does not apply.

2) The actual total loss of the vessel or cargo is unavoidable, or the cost required to avoid the actual total loss exceeds the insured value. The former refers to the fact that after the occurrence of an insured event, according to the objective situation, the ship will inevitably close or the actual total loss of the cargo will occur. The latter refers to the fact that after an insured accident occurs on a ship or cargo, although it can be rescued and repaired through measures, the cost paid exceeds the insured value, and the gains outweigh the losses.

3) Although the insured ship or cargo has not yet suffered an actual total loss.

Legal Analysis: Actual total loss refers to the complete loss of the insured goods due to natural disasters or accidents during transportation or completely promoting its original role. Presumptive total loss refers to the cost of repairing the damaged goods or the cost of transportation to the destination, which will cover the cost of the goods at the destination**.

Legal basis: Article 43 of the "Provisions on Procedures for Handling Road Traffic Accidents" Inspection, appraisal and assessment institutions and personnel shall complete the inspection, appraisal and assessment within the prescribed time limit if they accept the assignment or entrustment of the management department of the public security organ or the entrustment of the parties. After the results of the inspection, appraisal and assessment are confirmed, a written conclusion shall be issued, which shall be signed by the person inspecting, appraising or assessing and affixed with the seal of the institution.

The difference between actual total loss and presumed total loss is as follows:

1. The concept of actual total loss and presumed total loss.

1. Actual total loss: Actual total loss refers to the ratio between the total amount of claims received by the insurance company and the total insured amount underwritten by the insurance company in a certain period of time, that is, the actual total loss rate. The actual total loss ratio is a reflection of the actual loss of the insurance company, and it can reflect the actual loss of the insurance company.

2. Presumptive total loss: Putative total loss refers to the estimated loss rate given by the insurance company in a certain period of time according to a certain proportion according to the insurance amount and insurance premium underwritten by the insurance company, that is, the presumed total loss rate. The presumed total loss ratio can reflect the future loss of the insurance company, and it is the insurance company's ** of future losses.

2. The difference between actual total loss and presumed total loss.

1. The calculation method is not the same: the actual total loss is calculated based on the actual claim amount, while the presumed total loss is the estimated loss rate given according to a certain proportion according to the insurance amount and insurance premium underwritten by the insurance company.

2. The time of reflection is different: the actual total loss reflects the actual loss of the insurance company within a certain period of time, while the presumed total loss reflects the loss that the insurance company may incur in the future.

3. The information provided is different: the actual total loss can reflect the actual loss of the insurance company, while the presumed total loss can reflect the possibility of the insurance company's future loss.

3. The relationship between actual total loss and presumed total loss.

There is a close relationship between actual total loss and presumed total loss, actual total loss can reflect the extent of the insurer's actual loss, while the presumed total loss can reflect the likelihood of future loss of the insurer, and can help the insurer formulate an accurate strategy, improve the actual loss management system, and make accurate investment decisions. As a result, actual and presumed total loss are interlinked, and both play an important role in insurance pricing, insurance claims, and the financial management of insurance companies.

This article first introduces the concepts of actual and presumed total loss, then analyzes the differences between them, and finally summarizes the relationship between them. There is a close link between actual and presumed total loss, both of which play an important role in insurance pricing, insurance claims, and the financial management of insurers. Only by understanding the distinction between actual total loss and presumed total loss can we better manage the losses of insurance companies and achieve the sustainable development of the insurance industry.

1. The situation of the person who dresses up is different: the actual total loss refers to the actual complete deterioration or loss of the subject matter of the goods at sea during transportation, and the presumed total loss is the residual value of the damaged subject matter plus other costs and expenses that will exceed the value after it arrives at the destination;

2. The characteristics of the two are different: once the actual total loss occurs, you can directly claim compensation from the insurance company, and the premise of presumption of total loss is that the actual total loss has not occurred.

Marine insurance refers to the fact that after the policyholder pays the insurance premium, if the agreed subject matter suffers an accident at the agreed time and causes losses, the insurance company will pay compensation in accordance with the contract. Marine insurance originated in Italy at the end of the 11th century, and it is also a kind of property insurance, which can be divided into several forms: ship insurance, freight insurance, marine transportation cargo insurance, oil development insurance and protection liability insurance. Marine insurance shall follow the insurance contract signed by both parties when making claims, and shall pay compensation to the insured in a timely and reasonable manner.