What is an insurance write-off?

If someone tells you they’ve written-off their car, they usually mean that they’ve been involved in a major incident. Their vehicle is toast, fit only for breaking or scrap.

Car crash, smashed bonnet with debris

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But that is not always the case if an insurance company has written-off a car. There’s a chance the car isn’t the twisted tangle of metal you might have thought.

Insurance companies are within their rights to write off a car even if it has suffered only relatively minor damage, perhaps a few scratches to the paintwork or a small dent.

So where does that leave you? Is there anything you can do if you don’t agree with your insurer?

What is an insurance write-off?

Insurance write offs can happen because of a crash, the car is inundated with water during a flood or even because of accidental damage. The lid coming off a tin of paint one the way home from the DIY store could write-off your car.

If your insurer considers the cost of repairs to be uneconomical your car will be classed an insurance write-off. Uneconomical can mean repairs would cost 50%-60% of the vehicle's value, but this could be even lower for a brand new vehicle.

The car will then be kept by the insurer and you will receive a cash payout for the loss, usually the vehicle's 'market value'. This is the price your car would have sold for at a trusted dealership before it was damaged or stolen.

How does an insurer decide if a car is a write-off?

If your car is involved in an accident or accidentally damaged and you put in a claim, an insurance assessor or engineer will inspect the damage. They might visit in person or view photos and read reports from a garage.

The assessor follows strict criteria, but could judge your car to be a write-off if it is beyond ‘economical’ repair. Note the word economical – if repair costs are around 50%-60% of the car's valuation it will most likely be declared a total loss or a write-off. But it could be a lot less.

If this is the case, your insurer will offer a payout in the event of a write off, which should be enough to replace your car with a similar vehicle in a similar condition in your area.

The company will, however, deduct the policy excess.

Write off calculation

Let’s say your car is worth £10,000 and is written-off in an accident. The insurance company might offer a settlement of £10,000, less the excess of £300, to give you £9,700.

What are the insurance write-off categories?

The Association of British Insurers (ABI) and the Lloyd’s Market Association (LMA) have produced a Salvage Code that was updated in 2017. This was to take account of the fact that modern cars are often harder, and more expensive, to repair.

The revised code scrapped the A, B, C, D categories and made them clearer:

  • A: Scrap
  • B: Break
  • S: Structurally damaged repairable
  • N: Non-structurally damaged repairable

The new categories make clear that certain vehicles cannot be repaired at all. This was to stop unscrupulous repairers putting unsafe vehicles back on the road.

Some vehicles may still be repaired and put back on the road, as long as they pass strict checks. There is also a huge list of bodies that potentially need to be notified these include:

  • DVLA
  • Motor Insurance Anti-Fraud Theft Register (MIAFTR)
  • Police
  • DVSA
  • Vehicle data agencies and other interested organisations

The ABI Salvage Code goes into more detail on how vehicles are judged and what must happen to them:

  • Category A: This vehicle is deemed not suitable to be repaired. Must be crushed without any parts being removed. This vehicle will be classed as waste
  • Category B: The vehicle is deemed not suitable to be repaired. Usable parts can be recycled. This vehicle will be classed as waste
  • Category S: Repairable vehicle that has sustained damage to any part of the structural frame or chassis and the insurer/ self-insured owner has decided not to repair the vehicle
  • Category N: Repairable vehicle which has not sustained damage to the structural frame or chassis and the insurer/ self-insured owner has decided not to repair the vehicle. While the damage to the vehicle has been noted as non-structural, there may still be some safety-critical items that require replacement such as steering and suspension parts
  • Write-off values are relative

Category N write-offs tend to be the most contentious – this is where insurers can write off cars if they think the repairs are too costly relative to the value of the car.

They base their decision on the so-called repair-to-value ratio. For example, if your car is worth £5,000 and the repair-to-value ratio is 60%, the car would be written off if it would cost more than £3,000 to repair.

Different companies use different repair to value ratios, and you should be able to find out the figure from your own insurer. The repair-to-value calculation can result in what can seem surprising write-offs when the damage to a car is not particularly serious.

For instance, you might have reversed into your neighbour’s wall, scratching the paintwork on your car. It might not look too bad, but if the repair involves the removal of panels, the cost could mount up, causing the insurer to declare the car a total loss. This would be a category D write-off.

What if I don't agree with the decision to write-off my car?

The ABI/Lloyd’s Salvage Code says: “In the event of a dispute between the insurer and other interested parties regarding categorisation, the matter should be escalated to an appropriately qualified person who assumes responsibility for the final decision.”

That means it may be worth objecting or even raising a formal complaint. Insurers are sometimes a bit sneaky and offer low valuations, so you could consider the first offer they make to be a starting point in negotiations.

Car prices

Remember, the insurer can't take ownership of your car until you accept the settlement figure, so don't agree to a price you're not happy with.

Before you consider any offer, look up prices for similar vehicles in motor trade guides, as well as browsing the local dealers and looking on car sale websites. If you don’t think the insurer’s offer is a realistic reflection of the car’s value, contact the firm and use the evidence to back up your claim.

You can also include information on the service history and anything else that is likely to have an impact on the value. For example, you might recently have bought a new set of tyres.

You could even pay for your own independent engineer's report, but this will cost you so make sure you do your sums first to work out whether it'll be worth the extra outlay.

Value today, not at purchase

Don’t forget that the payout is based on the value of the car immediately before the accident so you should not expect to receive the price you originally paid for the car.

The Financial Ombudsman Services reported in 2018 that valuations for write-offs was major area of complaint. It explained how it check’s the insurer’s value.

It said: “To decide whether an insurer's valuation is reasonable, we compare it with prices in specialist on-line motor trade guides called Parkers (if the complaint is close to the date of the loss or damage), Glass’s, CAP and Cazana. We’ll generally look to see if the insurer’s valuation is in line with what the guides say.”

If my car is a write-off, can I buy it back?

In some circumstances you may be able to buy back your car from the insurer after it has been written off. You need to let your insurer know you want to do this at the earliest possible opportunity.

Once a settlement figure has been agreed, the insurer takes ownership of the vehicle. Most insurers already have contracts with salvage firms to hand over all their written-off vehicles. That means they may be reluctant to break those contracts and sell your car back to you.

Before you agree to buy the car back it's best to get an independent mechanic to give it the once over so you have a good idea of what you're considering paying for.

And stay in contact with your insurer throughout the entire claim process keep them informed of your interest to buy, then it's down to you to negotiate the best deal you can.

What if the write-off valuation won't cover my car finance?

If you bought a car on finance and it's written-off, you could find the settlement figure doesn't cover the outstanding repayments on your finance deal. You may be paying out for a car you no longer have, or the finance company may ask to be repaid in full, at once.

If the offer is well below the car’s market value you’ll need to go back to your insurer with this evidence and explain why you don’t think the offer is a fair reflection of the car’s value and come to a compromise on price.

If the insurer's market value looks to be right and the price difference is due to high interest repayments on the car finance, you’ll have to take this up with the finance company and come to an arrangement.

Car finance solutions

It could be worth explaining the situation to your insurer and finance company to see if you can use the settlement money to buy back the car and cover the repair bill yourself. This means you'll still have use of the car and can continue to make your finance repayments. That’s unlikely, though.

Alternatively, if the finance company is happy for you to use the insurance money to buy a replacement car and keep up the usual finance repayments, that could be another option.

If you do get a new car, it's worth taking out gap insurance to cover any shortfall between the price you paid for the car, including finance, and its current market value.

Take it to the Ombudsman

If the insurer won’t budge on the size of the value it will pay, you can take your case to the Financial Ombudsman Service (FOS), which is free and independent.

The FOS upholds about half of consumer complaints, so it’s often worth a try if you think you’ve got a valid case.

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