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If someone tells you they’ve written-off their car, you can safely assume they’ve been involved in a fairly major incident – vehicle beyond repair, fit only for scrap, that level of magnitude.
But if you hear of a car being written-off by an insurance company, there’s a reasonable chance the car isn’t the twisted tangle of metal you might have envisaged.
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 their diagnosis of the situation?
What is an insurance write-off?
If your car has suffered damage as a result of a crash and your insurer considers the cost of repairs to be uneconomical - usually around 50% of the vehicle's value - then it will be classed an insurance write-off.
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' - the price it 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 and you put in a claim, an insurance assessor or engineer will normally come and inspect the damage.
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% of the car's valuation it will most likely be declared a total loss or a write-off.
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.
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?
If your car is written off, it will fall into one of four categories: A, B, C or D.
Category A is the most serious and means the car is fit only for scrap and should never again be driven.
A category B write-offs is a vehicle that has suffered extensive damage and should never again be driven on the road, although some parts can be salvaged.
A category C is given to vehicles that could be repaired, in theory, but the cost would exceed the value of the vehicle.
Category D is a write-off are where the vehicle could be repaired but the costs are deemed too high relative to the vehicle’s value.
The Association of British Insurers’ Salvage Code dictates that Category A and Category B cars are broken up for spares and the body shells crushed. Write-offs in categories C and D can be sold on by the insurance company.
They can then be repaired and put back on the road, as long as they pass a Vehicle Identity Check with the DVLA where necessary.
Write-off values are relative
Category D 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 £4,000 and the repair-to-value ratio is 50%, the car would be written off if it would cost more than £2,000 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?
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.
And 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.
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.
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.
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, but 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, which means it now has this asset it needs to somehow get rid of - in this instance, you buying it back could offer the perfect solution for both parties.
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 have bought a car on finance and it's been written-off after an accident, you could find the settlement figure offered by your insurer doesn't cover the outstanding repayments on your finance deal.
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.
It could be worth explaining the situation to both the insurer the finance company to see if you can use the settlement money to buy back the vehicle and cover the repair bill yourself - this means you'll still have use of the car and can continue to make your finance repayments.
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 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 50% of consumer complaints, so it’s often worth a try if you think you’ve got a valid case.