Car Insurance Write-Offs Explained

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John Duckett
John Duckett
Last Updated: 15 Sep 2020
(Rated from 443 reviews)

Your son just got involved in an accident. It’s been a traumatizing time for your family, and as if the universe cant give you a break, now the insurance company has just broken the news of your new Audi model being damaged beyond repair.

While you’ve heard that the insurance firm can soften this blow, the reality is that there are several variables at play when you’re dealing with an insurance write-off. As much as you have a seemingly comprehensive insurance policy, there’s a probable chance that you might come out feeling hard done by.

That said, here’s a thorough guide on car insurance write-offs1 and how your insurer can help you make the most out of this terrible situation.

Shiny Car

Defining Auto Insurance Write-Offs

Insurance firms work along very stringent policies and guidelines when covering your car.  You sign an agreement to make monthly payments to the firm, and the insurer will, in turn, pay your losses to restore your vehicle in the roadworthy situation it was before the tragic accident.

Nevertheless, if the damaged vehicle can’t be safely restored or if it would be uneconomical to repair it thereupon, the insurance firm can constitute a write-off. You can receive a replacement of the same vehicle make or model, or a car insurance write-off payout, depending on what you need – minus the extra, dual insurance, betterment and depreciation2) in the retail market or trade value of the vehicle depending on your agreement with the insurance company.

For instance, your vehicle might emerge from an accident with minor damages that might seem fixable at the repair shop. Nonetheless, if the repair expenses are more than 70%, of the vehicle’s current value of R200 000 (in this instance, R140 000), your plan provider could declare the car as a total loss.

Most auto insurance firms in South Africa use their formula to figure out when a car is a total loss and are required to disclose it to you when you sign the insurance contract with them. You can also use the car insurance write off calculator, depending on the plan provider, to see how much you can get from your policy.

Understanding the Car Insurance Write Off Process

After notifying your plan provider of an accident and your intention to claim from your comprehensive car insurance policy, the firm will send an assessor3 to inspect the vehicle’s damage. The assessor will then calculate the cost of repairs and compare them with the capital value of the car. The assessor will also consider the availability of the parts, the age and condition of your vehicle. He/She will then decide if it can successfully be repaired and if it’s legally safe to put it back on the road, or if it’ll be more financially smart or more secure to write the vehicle off.

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Insurance Write Off Categories

There are four various levels of write-offs, depending on the degree of the vehicle’s damage. They include the following:

Category A

A vehicle that’s deemed a Category A (known as ‘Cat A’) write-off is one that’s meant for the scrapper and has been considered dangerous to be put on the road – even if it seems to have some salvageable parts. It happens that after the gravest of events – for instance, a severe fire – where the vehicle’s damage is so extensive that the only secure result is to scrap the whole thing.

The entire vehicle, or what’s left of it, must be wrecked, with no part of the car whatsoever legally able to be back on the public roads again.

Category B

When the vehicle is considered ‘Cat B’, it means that its body shell should be destroyed, even though other parts can be saved for reuse on other cars. It typically happens when the vehicle has gone through severe damage to a specific area of the car but another is entirely unaffected, like say a head-on collision that destroys the front part of your Audi but leaves the rear untouched.

The repair shop must scrap the core structure of the vehicle (body shell and any mechanical components), but strip off the non-structural parts like panels and trim pieces and use them again if they’re not destroyed.

Category S

Formerly recognized as a ‘Cat C’ write off, what’s now dubbed as ‘Cat S’ is a vehicle that has gone through structural damage but isn’t terminally broken. Though it doesn’t require any scraping, it needs a specialist professional repair before you can use it on the public roads again. The vehicle repairs in this category are costly – they might cost you more than your vehicle’s actual worth.

Even though the vehicle has suffered structural damages, if it’s properly repaired, then there won’t be a reason it won’t be as secure as it was before the accident. Vehicles are designed in a very modular manner, so you can even replace or repair the fairly significant features without affecting the rest of the car – if the professional does his job magnificently.

Nevertheless, it’s essential to be aware that there’s no legal requirement for the repairs to go through an inspection before the vehicle gets back on the road. Therefore, you don’t have any guarantees that the repairs will have been conducted to a legally acceptable standard.

Category N

‘Cat N’ means that your car has suffered non-structural damages, but it’s been considered too costly to repair by the insurance firm.

Vehicles under this category are usually fixable, although non-structural doesn’t mean drivable – as it could show a problem with its electronics, steering, brakes and other mechanical components.

In a Cat S or Cat N situation, the insurer will pay you the market value of the car and send it off for auction. Depending on the nature of the damages, the vehicle will either be stripped for parts, and the remainder scrapped, or a firm or individual can purchase it and handle the repairs and place it back on the road – which is practically legal.

Red Car

What Happens Afterward?

When the insurance firm is deciding how to compensate you for the write-off, they purchase the damaged vehicle from you, and they become the new owners. Once the car is in their possession, the insurer will probably sell it to a salvage firm to recover some of the expenses of the payout.

One vital thing you need to remember is that if your vehicle is still under financing at the time of the write-off, you have to alert the financing firm immediately. The car is still the property of the investor until the insurance firm decides to settle the claim and pay the outstanding amount to the financial institution. When providing you with loans, the bank (and some insurance firms) might give you top-up cover or credit shortfall insurance to cater to the outstanding balance on your mortgage4 if your vehicle is written off. Therefore, it would be imperative to consider these. 

Can You Disagree with A Write-Off?

If you don’t agree with the insurance company’s decision to write off your vehicle and believe it can be restored cost-effectively, you have the choice of appealing to the Ombudsman5. It would, nonetheless, be wise to attempt to intensify the matter within the insurance firm to figure out a resolution before escalating the same to Ombudsman.

Common Questions

What Is A Car Insurance Write-Off?
Why Do Auto Insurances Write Off Occur?
What Happens When Insurance Writes Off Your Car in South Africa? 
Can You Write Off Your Car Insurance as A Business Expense?

Car write-offs are not only designated to the mangled wrecks destined for a scrapyard. While general damages are frequently enough to warrant the vehicle being written off as ‘beyond repair,’ in most cases, the car isn’t just worth to be repaired even if it looks decent. Thus, you before you start making financial plans for the car that just got all mangled up, be sure to consult with your insurer for the best advice on how to handle the situation, and consider picking the safest car color if you decide to buy a new one.

John Duckett
John Duckett

John helps individuals get the best deal on car insurance. He advises on how to match client needs with budget and successfully negotiates with insurance houses to exceed client expectations. Working in the online space is his passion, he loves to share his knowledge on insurance and keeps an updated blog.

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