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What happens when your car is written off

For some people, their car is like a family member. It’s been doted on and has given reliable service for years, which is why parting can be such a wrench. So what happens when that car is written off through crash damage, which may be only minor?

The problem that owners have when a car is assessed after a crash, is that there’s no sentimentality where insurance companies are concerned. They see your car as a commodity with a fixed value – it doesn’t matter how reliable it’s been or how much money you’ve sunk into it over the years.

When a car’s value is assessed after a crash, it’s based solely on what it would have fetched on the open market before the collision. So if your decade-old car is worth £2000 and you spend £1000 on servicing it and fitting some new tyres, it’s still worth only £2000. Every year around 450,000 cars are written off in the UK because of accident damage; what happens if yours is one of them?

Call your insurer

If you’re involved in a crash, one of the things you’ll need to do soon after is call your insurance company, whether or not it’s your fault. The ball is in your insurer’s court from here on. They’ll send an assessor to establish if it’s economically viable to fix the car; it may be that it’s written off even if the damage is minor, if the cost of repairs is too high relative to the car’s value.

There are four categories of write-off; for more on how they work and why your car could be written off much more readily than you think, check out our blog that tells all.

Once you’ve called your insurer you’ll be given a courtesy car if that’s what you arranged when taking out the policy. This will obviously cost your insurer which gives them an incentive to assess the damage as quickly as possible; once they’ve paid up in the event of a write-off, the courtesy car will be snatched back and it’s up to you to sort our your own transport.

What about your car?

Firstly, just because your insurer tells you your car is a write-off you don’t have to accept this – you can appeal, but only if it’s a Category C or D write-off. It might be that your car has been valued on the low side; your first step is to challenge this, because this will also affect the amount of cash you’re given in settlement.

If the car is worth more than your insurer reckons, it might become economically viable to fix it – especially if you go to a cheaper bodyshop than your insurer uses. Officially approved bodyshops tend to charge more, which is why using these makes an insurance write-off more likely.

Your insurer will want to use bodyshops it has vetted, and this is where things can work in your favour. If you’re prepared to buy the written off car from your insurer you can then get it fixed where you like. You’ll need to make it clear when you file your claim that you want to buy it back though, or you might find that it’s effectively been disposed of before a settlement has been reached.

If you take this route you’ll have a car which is recorded as an insurance write-off. Our blog on insuring a write-off  guides you through everything you need to know.

If your car is on finance

This is where things can get complicated, because there are so many variables. The type of loan you take out, along with its balance relative to the value of your car when it’s written off are all important here.

If you take out finance on a new car and it’s written off within a year or two, the chances are you’ll owe more than the value of the insurance payout. We explained this more fully in our blog on how depreciation works, but the bottom line is that if you don’t have any GAP (Guaranteed Asset Protection) insurance in place, you’ll be out of pocket.

If your loan was taken out against a used car, it’s more likely that what you owe is roughly equal to the value of the written off car. You may have to put a bit of money in to clear the debt or you may get a bit back after the loan has been paid off. Either way, with this loan paid off you’ll have to start all over again with your new car.

When you know your car is a write-off, call your finance company and explain the situation – don’t just cancel any monthly payments because you still owe the money. Depending on the type of loan you’ve taken out, your insurance company might just pay your insurer what you owe them, and if there’s anything left over you’ll get that once your debt is cleared.

What about insurance?

When you take out car insurance you’re signing up for a year, and in the event of a claim you can’t cancel it, even if there are still lots of months to run. That’s because your insurer has stuck to its part of the bargain by paying out, so you trying to cut things short would be rather unfair.

As a result, if you’re paying your insurance in monthly instalments you’ll have to keep coughing up, even if the car has been destroyed. However, if you replace the car and stick with your current insurer, the chances are they’ll allow you to switch the policy to cover your new vehicle, although you’ll probably have to pay some extra cash to do this.

The key thing in the event of an insurance claim is to communicate with all parties and don’t be afraid to ask questions. If you’re open and honest with everyone involved and you’re guided by them, you can manage any issues. But go quiet in the hope that the problem will go away, and things will just go from bad to worse.

Richard Dredge
October 2016