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Being involved in a car accident is a traumatic event in itself, so the news that your vehicle is damaged beyond repair is not an easy pill to swallow. While insurance will soften this blow, the reality is that many variables are at play when dealing with a write-off and many people - even those with the most seemingly comprehensive insurance policies - come out feeling hard done by.

This is according to Christelle Colman, managing director and founder of Elite Risk Acceptances, who says that being clued-up about the process followed by insurers in the event of a car being written off can help policyholders to navigate the claims process better and avoid any unnecessary financial loss.

“Generally speaking, an insurer will classify a car as a write-off if the cost of repairs is high in relation to - or more than - the car's insured value. This, however, is by no means an exact science and will depend on the car's make, date of registration and mileage. Even the popularity of the car may come into play, as this influences the availability and cost of repair parts.”

Colman uses the example of an imported car, which may have relatively small damage, but due to the high cost of repairs, insurers will elect to write the vehicle off. “In this instance, it will cost less to pay out the value of the vehicle in full than to repair the damage. Insurers are also entitled to the salvage and will, in terms of their agreements, recover a portion of the claims cost from the salvage dealer.”

But some premium insurers would replace a car with a new one if it is written off within the first year or two of registration.

“When this 'new-for-old' benefit is not applicable, insurers tend to settle the full retail amount in cash following a total loss, less the applicable excesses, which is another very important consideration.

"Too often, policyholders only find out about hefty excess structures at the time of a loss when they are ill-prepared to afford the payments,” Colman added.

Differentiating between retail, market and book value, and knowing what a car is insured for, is another topic that Colman said caused untold confusion for policyholders.

“Unfortunately, some insurers seem to have different definitions of what market, book, retail or guaranteed sum insured values are, so my advice would be to get this on record”

If the accident was caused by another individual, Colman said an insurer would usually action a third-party recovery on the policyholder’s behalf. “Where the recovery is successful, the policyholder will be refunded the excess paid and have their no-claim record reinstated. It is therefore vital to get all the information at the scene of the accident, including photographs of the accident scene and vehicle, as this can greatly assist insures to make a successful recovery of damages”

Colman urges people to check and understand whether their policy covered a courtesy car in the event of a write off. “This extension is often elective and carries an additional premium. Policyholders are often left unable to get to work or execute on their duties, as the insured vehicle is either in for a long period of repairs, or a waiting period following a write off,” she said. 

PERSONAL FINANCE