When a car is written off by an insurance company, it means that the car is deemed to be a total loss or beyond repair after a car accident. This is a devastating financial decision for any car owner, as the amount of money paid out by the insurance company for repairs or a replacement vehicle will not compensate for the full market value of the written-off vehicle.
If an insurance company writes your car off, the company should provide you with a comparable replacement vehicle, or a cash settlement that is equivalent to your car’s market value at the time of the accident. The good news is that the cost of repairing your car is usually taken off this payment, but the bad news is that the payment amount is usually much lower than the amount you paid for your car. This is because the amount of money paid out by the insurance company is based on the car’s current market value.
Therefore, if the car market has decreased since you purchased your car, you are likely to receive less money than you paid originally. In addition, when an insurance company writes your car off, they may also take into account any modifications made to the car which could reduce the overall settlement payments.
When considering whether to write off a car, the insurance company will assess the cost of the repairs against the car’s current market value. If the repair costs are more than the car’s current market value, the insurance company may decide to write-off the car. Otherwise, if the repair costs are less than or equal to the car’s current market value, the insurance company may decide to repair the car and provide a reimbursement for the cost of repairs.
Before making a final decision, the insurance company may ask for additional information about the car’s condition. For example, the company may ask for a comprehensive report, a written statement from a qualified mechanic, and any relevant pictures of the car in the aftermath of the accident. The insurance company may also ask for an invoice or a receipt for any items that were damaged or destroyed during the accident.
It is important to note that if your car is written off, the insurance company may require you to pay off remaining loan payments on the car. Depending on the terms of the loan agreement, if you do not abide by the loan terms, the loan company may take legal action against you. It is also important to make sure that you keep up with regular maintenance and servicing of your car before an accident as this may increase its current market value.
Insurance Claim Excess
In some cases, an insurance company may choose to write off a car even if the cost of repairing it is lower than the car’s current market value. This is due to the insurance company’s ‘excess’ policy, which states that the company will not pay for the full cost of repairs unless the total repair cost exceeds the current market value of the car.
For example, say you have an insurance policy with a $500 excess, and you have a car accident that requires repairs which cost $900. In this case, even though the repair costs are less than the car’s current market value, the insurance company may still choose to write off the car. This is because the insurance company is only willing to pay up to $500 towards the repair costs, meaning that the actual expenditure is $1,400 ($900 for repairs plus the $500 policy excess).
It is important to note that the excess payment does not apply to the cost of a replacement vehicle or cash settlement. In this case, the insurance company will pay the full value of the car’s current market value, minus the cost of any repairs already covered.
Choosing a Replacement Vehicle
Once the insurance company has agreed to write off your car, they should provide you with a comparable replacement vehicle or a cash settlement equal to the car’s market value. It is important to note that the replacement vehicle may be of lower value than your previous car, due to the difference in market prices at the time of the accident.
When choosing a replacement vehicle, it is important to take into consideration any modifications that may have been made to your previous vehicle. For example, if your previous car was fitted with special safety features, like airbags or special tyres, you should look for a replacement vehicle that also has these features.
It is also important to consider the running costs of the replacement vehicle. Take into account the car’s fuel efficiency, as this may have an impact on your car insurance premiums and the overall costs of running the car. Additionally, you should research the car’s service and MOT requirements and the reliability ratings of the replacement car.
Selling the Written-off Car
You may choose to sell the written-off car in certain circumstances, such as if the car has been damaged beyond repair but still has working components. In this case, the insurance company will usually pay you the current market value of the car, minus any costs they have already paid out towards repairs.
It is important to note that you should always contact your insurance company before you attempt to sell the written-off car. This is to ensure that you do not breach any terms or conditions of the policy, as this could potentially affect any future insurance claims.
You should also remember that the car is legally considered as a ‘catastrophic loss’ and as such, it must be disposed of in an environmentally friendly way. Before selling the car, you should contact the local council to ensure that the car is being disposed of in a legal and safe manner.
Receiving Cash or a Replacement Vehicle
If the insurance company decides to replace the car with a new or used vehicle, or offer you a cash settlement, you are likely to receive a payment that is much lower than the car’s original purchase price. In some cases, you may be entitled to receive a higher payment if your car had special modifications, such as a satellite navigation system or customised paint work.
It is important to remember that the insurance company will only pay out the car’s current market value and not the amount you paid for the car when it was originally bought. Additionally, it may take some time for the insurance company to process your claim and the paperwork and consequently, you may not receive the payment until some time later.
Protecting Your Vehicle
As mentioned above, it is important to keep up with regular maintenance and servicing of your car in order to increase its current market value. This is particularly important if you live in an area prone to extreme weather conditions or if the car is exposed to heavy use. Additionally, it is important to monitor the car’s tires and brakes and ensure that they are in optimal condition.
If you are unable to maintain your vehicle, you may be able to extend your car insurance policy to include roadside assistance or emergency services. These services could potentially save you from having to pay for the full cost of emergency repairs and towing charges if your car breaks down.
Growing Impact of Automotive Safety Devices
In recent years, automotive safety devices, such as airbags, anti-lock braking systems, and blind spot monitors, have become increasingly popular and are installed as standard features in many modern cars. These features not only increase the safety and protection of passengers, but they can also significantly increase the car’s current market value.
Research by the Department of Transportation has found that cars fitted with these safety features are less likely to be involved in serious collisions and as such, they are more likely to retain their market value. Additionally, research has also found that cars with these safety features are cheaper to insure as the overall risk of accidents is reduced.
Therefore, it is important to consider the impact that these safety devices may have on the car’s current market value and to make sure that you are taking advantage of any discounts that may be available when purchasing car insurance.
Conclusion
In summary, when an insurance company writes your car off, they will usually provide you with a comparable replacement vehicle or a cash settlement that is equivalent to the car’s current market value. It is important to take into consideration any special modifications that may have been made to the car and to make sure that you keep up with regular maintenance and servicing in order to increase the car’s current market value.
