When the insurance company tells you that they are going to write off your car after an accident, you may be surprised. You might picture a written-off car as something that is totally crumpled up and undrivable. And your car might not look nearly that bad.

But car insurance companies have other factors to take into consideration. Often it is simply not worth their while to try and repair your vehicle. They would rather choose to pay out the amount your car is insured for.

So how do insurance companies decide when to write off a car? Read on to learn more about what defines a write-off, how the procedure works, and what it means for you.

What is a Write-Off in Car Insurance?

A car is considered a write-off if it will cost the insurance company more to repair the damages after an accident than to pay out the vehicle’s insured value. Some companies also call this a totaled car, meaning it is a total loss.

There is no exact threshold for when a car is repaired versus written off. An appraiser for the insurance company will look at several factors to determine the value of your car and the cost of repairs.

These factors include:

• The car’s model, make, year, and odometer reading.
• The engine type and condition.
• The popularity of the car and whether or not it was imported.
• The listed value of similar cars in dealerships.

A vehicle is also considered a write-off if it can’t be safely repaired and will never be roadworthy again.

What is the Car Insurance Write-Off Procedure?

Accidents can be stressful experiences. But if you stay calm and gather as much information as you can, it will make the next steps much smoother.

Ask the other driver for their personal details and information about their car and insurance company. You will need all of this when you make a police report and file an insurance claim.

Car Appraisal After an Accident

After you have filed an accident report with your insurance company, they will send an assessor to look at your vehicle.

The assessor will consider the extent of the damages, the age and general condition of your vehicle, and the availability of parts. Basically, they do the math of what your car was worth before the accident. Then they compare that to the repair costs, less the money they can get from selling your vehicle to a salvage company.

With all these factors taken into consideration, if the insurance company will make a loss trying to repair your car, they will decide to rather write it off.

Remember, if your car is under financing when it is written off, you should immediately contact the bank or financing company to inform them. Since the vehicle is still technically their property, the insurance company might settle the claim with them and pay any money you still owe.

Payment or Replacement of the Written-Off Vehicle

After the car accident appraisal, you will either receive a replacement vehicle of a similar make and model, or a cash payout. In accordance with the principle of indemnity, the insurance company will try to pay enough to cover your loss.

The money the insurance company pays out is called a settlement figure. This figure is the insured value of your vehicle minus deductions.

The insured value is determined by comparing prices of cars similar to yours. This will be the trade, retail, or market prices of cars, depending on the agreement in your initial insurance policy.

Some possible deductions that can impact your settlement figure are:

• Excess. This is the amount you need to pay the insurance company when making a claim after an accident.
• Depreciation. This is the amount by which your vehicle’s value has decreased over the years through general wear and tear.
• Outstanding financed amount. If your car is still being financed by the bank or a financing company, you need to pay the amount you still owe them.
• Dual insurance. If your car is insured by two different overlapping policies.

Once the final amount is calculated, the insurance company will pay the money into your account. You can then use this money to buy or finance a new car.

What If You Don’t Agree?

It may happen that the insurance company decides to write off your car but you disagree. You may think that the damage isn’t as severe as they make it out to be and that your beloved car can still be fixed in a cost-effective manner.

If this is the situation you are in, first try and talk to your insurance company. Find your own repair quotes and try to make a case that it will be economically beneficial to fix your car.

However, if the insurance company will not budge, you have the option to appeal to the Ombudsman for Short Term Insurance. You can lodge a complaint online for free and they will consider your situation fairly and impartially.

If after appealing to the insurance company and the Ombudsman, your car is still written off, you have the option of keeping it. As long as your vehicle isn’t financed, you can ask the insurance company if you can keep your car.

You will need to sign a disclaimer that you won’t hold the company responsible to pay for damages. They will pay you a smaller settlement and you can then keep your car and pay for repairments.

Just note that insurance companies strongly advise against going this route. You will probably end up paying a lot more for repairs and possibly not getting your vehicle roadworthy in the end.

Final Thoughts on Insurance Write-Offs

It is always hard to hear that an insurance company decided to write off your car. But usually, their decision is for the best.

They would have done a thorough appraisal of your car’s value and the cost of repairs before coming to this decision.

So even though it may be hard for you, trust that financially it is probably best to take the settlement money and say your goodbyes to your old car.