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What is an insurance write-off?

01 Sep 2011 at 15:40

Motorists who have been involved in a vehicle collision can be informed by their car insurance company that their car is a 'write-off'.

This usually means their car will be retained by the car insurance firm, instead of being repaired, with the owner receiving a cash payout.

Last year, 4 cars in 100 were declared insurance write-offs, says vehicle information firm HPI. But what exactly does the term 'write-off' mean? Well, it is industry jargon for 'beyond economical repair'. An uneconomical repair is based on a repair-to-value ratio. The repair-to-value ratio is different for each insurance company.

In most cases the car insurance company should able to tell you this figure. An example of this is if your vehicle was worth £5000 and your insurance company used a repair to value ratio of 60%. The vehicle would be considered to be beyond economical repair if the repair costs exceeded £3000.

Car insurance companies employ vehicle assessors to calculate the cost of repairs and make this judgement. They will inspect the overall condition of your vehicle and analyse the collision damage.

They work to strict guidelines. Car insurance companies have a duty to return a car to the condition it was in before the accident. However, this is expensive: it dictates which workshops and parts should be used.

All this is factored into the calculations insurance assessors use, so costs thus soon rise. This is why write-offs do not always have to be particularly serious. If a car is a few years old, a simple cosmetic scrape along one side can see it declared a write-off by the assessor: the expense of repairing and painting the panels can exceed the car's actual value, even if there is no actual structural damage.

Car insurance assessors use various categories of car insurance write-off to rank the seriousness of accident damage. Two categories represent very serious damage, but two other categories are for 'economic write-offs' – where damage is expensive but not necessarily dangerous.

Write-off categories

Category A: scrap only. For cars so badly damaged, there are few or no salvageable parts. Should never re-appear on road.

Category B: body shell should be crushed. Signifies extensive damage, although some parts are salvageable. Should never re-appear on road.

Category C: the vehicle is repairable but the costs exceed the vehicle’s value. Can re-appear on road.

Category D: the vehicle is repairable but repair costs are significant compared to the vehicle value. Can re-appear on road.
The ABI Salvage Code dictates that Category A and Category B cars are broken for spares and the body shell crushed. However, write-offs in the latter two categories can be sold on by the insurance company, either to the original owner or to a third party via a car salvage company. They can then be repaired and, provided they pass a Vehicle Identity Check with the DVLA, can be put back on the road.

These can represent a bargain, if they are priced accordingly. An older car can be repaired to an acceptable standard at a lower cost than that dictated by an insurance company’s exacting standards. These cars will provide many more years of good service at a great-value price – just so long as the buyer is aware of their past.

Some sellers try to pass off Category C or Category D cars as non-damaged motors by hiding their past. If the buyer does not carry out a history check, they will not be aware the vehicle has previously been damaged, and so will pay over the odds. This is why vehicle history checks are so important.

Suffering an accident that leads to a vehicle write-off is distressing. But unwittingly purchasing a written-off vehicle and paying over the odds for it is painful too. Make sure you know how to interpret the jargon and are fully aware of a vehicle's past so you don't get caught out by an unscrupulous seller.