Car insurance write-offs (total loss) and how to challenge them

If your car is declared a total loss after an accident it may not be the end of the road. Find out how you can challenge a write-off assessment - and whether you should.

Key points

The phrase 'total loss' sounds like it foreshadows despair for any motorist whose car is involved in a major accident, but that need not be the case.

On the one hand your vehicle may never make it back onto the road and you may feel dissatisfied with the compensation figure being offered by your car insurance provider.

On the other, it's worth considering the offer as the start of a negotiation process and there are some practical steps you can consider in order to achieve a more favourable settlement.

"In my experience insurance companies don't set out to offer lower-than-market figures for a total loss, because it normally leads to more work and more expense," said Gocompare.com's Paul Sample.

"But there can be a few exceptions and in those instances it's important to put forward as much evidence as you can to back up your case."

Classification of total loss

A vehicle is treated as a total loss - more commonly known as a write-off - if the insurance company considers the cost of full repair to be uneconomical.

This doesn't mean that the repair costs have to be more than the vehicle is worth. It could be that any cost that exceeds around 50% of the value is considered not to be worth undertaking.

The other class of total loss is where a vehicle has been stolen and is never found.Car

There are four categories of salvage defined in a code of practice between insurers, the DVLA, Trading Standards and the Department of Transport. These are termed A, B, C and D:

  • Category A: Severely damaged vehicles fit only for scrap
  • Category B: Vehicles can be broken up for spare parts
  • Category C: Vehicles that can be safely repaired, but costs would exceed pre-accident value
  • Category D: Includes where repairs would be less than the pre-accident value of the vehicle

Settlement price

Following an engineer's inspection your insurer may decide that your car is a total loss and offer a settlement price.

This will be based on their view of the market value on the date immediately before it was damaged.

This settlement figure may be disappointingly low for the owner - especially if he or she still bases their own estimate on what they paid for the car not very long ago.

For example, if a car is bought for £10,000 and a year later becomes a total loss, then an insurer may only offer £7,500 to replace it.

This will be based on their view of what the car is worth, irrespective of the price paid 12 months earlier.

Estimated value and guaranteed value

One reason why many people are disappointed with total loss payouts is because the sum doesn't match the estimation of a car's value that they'd made when they took out the insurance policy.How to cut the cost of car hire

Remember, though, that this was only ever an estimated value rather than the market value, and it won't take into account depreciation and other changes.

Some insurers do offer guaranteed value policies so you may want to consider this when arranging your cover. Remember, though, that such policies are likely to come with a higher premium.

Guaranteed value options are typically more popular with owners of vehicles such as classic cars and modified cars where the true worth of the machine is more difficult to judge and quantify.

Challenging a settlement

If - after factoring in depreciation and the mileage on the car - you feel that the total loss settlement figure is still too low, you can dispute the amount with your insurer.

However, you'll need to arm yourself with evidence to support your case.

Start with some reputable and accurate valuation guides such as Parker's and Glass's, either in print or online. Remember that you're looking at the trade value, not the forecourt price.

Make sure you do the appropriate adjustments for mileage, vehicle condition and model type if they're not in the stated calculation.

Gather all the service history for your car and anything else you feel adds to its value, such as evidence of new parts and tyres.

Consider paying for your own independent engineer's report, although you should consider the cost and whether you're about to lay out more than you could gain back.

Adverts for your make and model of car - on websites or in trade magazines - can be reasonably useful, but keep in mind that small differences in condition, mileage and year of registration can significantly alter the value.Beginners' guide to short-term motor insurance

Also, be aware that the advertised price may often be more than a car is actually sold for.

Adverts may prove more useful, however, if your car has a rarity value. It may have been imported or modified, and so be more difficult to value from ready-made guides.

Present all this information to your insurance company in a spirit of friendly negotiation. And remember to stay calm.

Gap insurance

There are other measures a driver can take to protect against losses in the event of your vehicle being damaged beyond repair.

One is to consider Guaranteed Asset Protection (Gap) insurance - a policy that covers you for the difference between the value of your car when you buy it and the payout you might receive in the event of a total loss.

By paying a premium, you can bridge the (often significant) gap between the two figures.

For example, that £10,000 car mentioned above might be worth just £4,000 when it's declared a total loss three years later.

The Gap insurance could meet the £6,000 difference, something that might be invaluable if you bought the car with a loan or on a contract hire deal.

In such circumstances, without Gap insurance you could be left with no car but large payments still owing in outstanding finance.Gap insurance: A car after an accident

Note, though, that the Gap insurance industry has come in for criticism, so do your research and consider all the options before committing to a policy.

Buying your car back

Depending on the circumstances of the total loss it may be possible for you to retrieve your vehicle after receiving an agreed payout.

The vehicle remains your property until the insurer settles the claim. At this point it becomes the insurer's property as they've paid you for that car, returning you to a position where you have the funds to go and buy another.

Remember!

  • If you want a write-off back, make sure your insurer knows

The insurer now has this asset to dispose of and - if you want it back - the first step is to have told your insurer of your interest at the earliest possible opportunity.

It's also wise to locate the vehicle and inspect it so that you have a better idea of what you're considering paying for.

Keep in close touch with your insurer throughout the entire claim process to ensure they remain aware of your interest, then it's down to you to negotiate an acceptable deal.

A damaged car after an accident

By Graham Thomas