• Fri. Dec 8th, 2023

Car Auto Insurance

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Vehicle write-off is more complicated than a simple payout

How do you know when your damaged vehicle is a write-off or a repair job? You’ll need to work with your insurance company

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Getting into a serious accident is every driver’s nightmare. Assuming you and any passengers (as well as the other driver) are all OK, the next thing to worry about is the damage to your car. Is it just a fender bender? Or is it much worse?

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Your insurance company will look at the damage and determine whether it’s a “total loss.” What that means is that the cost of repairing the vehicle is more than the actual value of the vehicle itself. But what goes into this calculation? And what are your options once your insurance company has written off your damaged vehicle?

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How insurance providers decide whether to write-off or repair

In the event of serious damage, insurance appraisers will take the time to assess the value of your vehicle prior to the accident occurring, thereby establishing an actual cash value (ACV).

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ACV is often determined by factors like:

  • Vehicle type: Make, model, and year.
  • Customization: Extras or custom equipment.
  • Kilometres: Unusually low or high mileage can significantly impact ACV.
  • Condition: Insurers will try to guess the condition of the interiors and other parts of the car prior to the accident.
  • Sale price: Current price ranges for similar vehicles will be compared.

Once they’ve established the ACV, they will look at the damage and the cost of repairs. The higher the cost of the repair compared to the established value of the vehicle means your car will likely get written-off and you will be paid a cash settlement. Typically, if the cost of repairs reaches 50 per cent or more of the vehicle’s value, your insurance provider will write the vehicle off.

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Sometimes even repairs that are less than the value of your car will lead to a write-off as well. The reasons for a write-off include high inflation and car part prices, difficulty in obtaining parts, and dealing with older model cars that may be more difficult (and costlier) to repair.

Plus, there are the airbags. Even when repairs don’t appear to be bad on the surface, deployed airbags can add several thousand dollars to the repair of a car and might indicate greater structural damage than is visible at first glance.

Collision Photo by Getty

How to challenge the assessment

Insurance companies are for-profit and will look to minimize risks and their losses — but you can fight decisions if you don’t agree with the original assessment.

Always keep records of improvements you’ve made to the car as that can help prove it might be worth more than the insurance company has calculated. Also, insurance companies have arbitration processes that allow you to challenge decisions — just make sure not to sign any documents or accept any money from your insurer if you disagree with the assessment.

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Lastly, you have the right to buy back your car after the write-off and attempt to repair it yourself. Likely, the insurance company will reduce the amount of your settlement by the buy-back amount and return the car to you.

What if you haven’t paid off your vehicle?

If, for example, you borrowed money to buy your car and the value of your loan is greater than the value of your vehicle — and you don’t have gap insurance — you’ll still be required to pay back the difference to your lender. So, if your insurance company says your written-off car was worth $5,000 and you still have $7,000 on your loan, you’d have to pay back the difference of $2,000.

If you lease your car, you’d still have to pay your normal payments until the claim is settled, and just like a car that is financed, you’d have to pay the difference between the amounts owed on the lease and what you received in your settlement.

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When it comes to your insurance premium, a written-off vehicle will not necessarily impact your insurance rate. It is considered as if it were any other accident. However, after an accident, insurers will determine who is actually at fault to evaluate the risk of the driver. If you are found at fault, your insurance premiums will go up — but you may not necessarily lose your insurance.

The best thing you can do is stay safe to avoid collisions. In the event of a serious collision that leads to assessments and settlements, talk to your insurance provider and don’t accept any offers until you are satisfied the process has been carried out to your satisfaction.

LowestRates.ca is a free and independent rate comparison website that allows Canadians to compare rates for various financial products, like auto and home insurance, mortgages, and credit cards. 
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