Rights and wrongs of an insurance write-off

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.

Crashed Fiat Uno in 1990 – courtesy of Mark Hillary on Flickr.

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 pain2rk 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?

An inspector calls

Here’s how it works. 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.

Inspecting the damage – courtesy of Dave Harrison on Flickr.

Insurers can declare a car to be a total loss, or write-off, if the repair bill is higher than the value of the vehicle before the accident.

So, if your car is worth £5,000 but the repairs cost £6,000, it will most likely be written off.

Letters of intent

There are 4 categories of write-off:

Category A is the most serious and means the car is fit only for scrap and should never again be driven.

Category B write-offs have suffered extensive damage. Again, they should never re-appear on the road, although some parts can be salvaged.

Category C write-offs could in theory be repaired, but the cost would exceed the value of the vehicle.

Category D write-offs are where the car 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.

Theory of relativity

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.

Scratch and sniff

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 pain2rk 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.

Write-off rules

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.

Adams car care – courtesy of jellyspoon on Flickr

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.

Check the cheque!

Insurers are sometimes a bit sneaky and offer low valuations, so it’s worth checking the amount is fair before you cash in any cheque.

You can 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.

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

Ombudsman option

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.

Rights and wrongs of an insurance write-off