When an insured item or property meets a total loss that is unrecoverable and non-reusable, the actual total loss occurs. The item cannot be reused or repaired for further usage. Normally when a loss occurs, the notice of abandonment is given by the insured to the insurer if he wants to abandon the item. But in such a case of actual total loss, the notice of abandonment is not required and the sum insured has to be paid by the insurer to the insured. The insurable interest itself is divested to the insurer without the notice. The payment of the maximum possible amount according to the policy is made after the checking of validity of the claim. The term is used very often in case of marine losses. There are 2 different type of marine losses which are:-
Total loss: When the loss is total and all of the item insured cannot be reused or recovered
Partial Loss: When the loss is partial and the item insured can be partially recovered or reused
For Example: If a ship is destroyed and submerged in a sea such that it cannot be recovered or reused. It is said to have been an actual total loss. The notice of abandonment is not required and the sum insured will have to be paid by the insurer to the insured.