There are few events more stressful than getting involved in a car accident, especially if your car insurer tells you that your vehicle is a ‘write off’. This is insurance jargon, meaning that your insurer has decided that repairing your car does not make financial sense or is not safe to put back on the road. It is a frustrating experience, especially if the car doesn’t look that badly damaged to your eyes.
Ernest North, co-founder of the car insurance provider Naked, answers some frequently asked questions about car insurance and write-offs.
How does an insurer decide that a car is a write-off?
An insurer may decide to write your vehicle off after a major accident, or, less commonly, if it is damaged by fire or severe weather, or recovered in poor condition after being stolen.
“When you submit a claim, the insurer will appoint an assessor to inspect the vehicle and calculate the cost of repair,” says North. “If the repair costs are high compared to the car’s value, the insurer may decide it is a total loss rather than something that should be repaired.”
While thresholds can differ between insurers, a common rule of thumb is that if repairs are likely to exceed 50–75% of the vehicle’s value, the car is usually written off.
“In simple terms, the insurer is weighing up what it would cost to repair the car properly and safely, against what the car is worth,” North explains. “If the numbers don’t make sense, or there are safety concerns, it’s more likely to be written off.”
Key factors that influence the decision include:
- How severe the damage is – bad structural damage to the frame of the car might make it too expensive or even impossible to repair safely.
- The age and condition of the car – it does not make sense to pay more to fix the car if repairs will be more than its book value.
- Parts availability – imported or luxury vehicles can be expensive and slow to fix.
What happens when a car is declared a write-off?
If your car is written off, your insurer will pay you out instead of paying for your car to be fixed.
The payout will be based on the terms of your policy, usually the insured or market value of the car minus your excess. If you are still paying off your car, the payout will be used to settle what you still owe to the bank.
“Many people only realise after the fact that the settlement is first used to cover the outstanding finance,” says North. “If there’s a shortfall — meaning you owe more than the insurer pays out — you’re responsible for that gap unless you have shortfall cover.”
What does the insurer do with my scrapped vehicle?
Once the claim is settled, the insurer usually becomes the owner of the damaged vehicle. In most cases, the insurer takes ownership of your damaged car and sells it for salvage or scrap.
Some insurers may allow you to buy your car wreck. However, your bank must agree if you still owe money. “In this case, the insurer deducts the car’s salvage value from your payout, and you will take responsibility for repairs, roadworthy tests and re-registration,” says North.
What are salvage titles?
If a car is written off, it will carry a salvage record, which can affect future insurance, financing and resale.
“A salvage title is essentially a permanent marker on the vehicle’s history,” says North. “Even if the car is repaired and looks perfect, the record can still influence what you can do with it and how easily you can insure or sell it later.”
These write-off codes are as follows:
- Code 2: Still considered a used car that can be repaired and registered normally.
- Code 3: Severe structural damage, but it can be repaired. It must be rebuilt and re-registered as “rebuilt”.
- Code 3A: Beyond repair and generally stripped for parts.
- Code 4: Completely destroyed and must be scrapped.
What are the risks of buying back my written-off car?
If you buy your car back, you may find that it is difficult to get it affordably repaired. “Even if you can get the car fixed, it might have hidden damage that will become obvious later or it might not be completely safe to drive,” says North.
Have a professional check the vehicle’s structure, mechanicals, and safety components. Some insurers won’t cover previously written-off cars, or they’ll charge higher premiums. The resale value will also be low. The car will need a new roadworthiness certificate and must pass stringent safety tests to be re-registered.
As such, it may only be a real option if your car was written off solely due to its age and you are able to pay for the repairs or if your car was a collectable and there is value in restoration.