What happens when your vehicle is written off following an accident?
Picture this: you’ve just crashed your car, your pride and joy, and the accident was your fault. You make a claim on your comprehensive car insurance policy and fully expect your insurer to cover the cost of repairing the vehicle. You’re shocked when the provider tells you the car has been written off and you can’t replace it. Instead of getting your car back, you get an insurance payout much lower than you had bargained for.
How does this situation occur, and is it legal? Let’s find out.
What is a write-off?
While legislation differs slightly between states and territories, Australia has a national framework of damage assessment criteria used to classify vehicles as written off. The “Damage Assessment Criteria for the Classification of Statutory Write-Offs” guide outlines two classifications of written-off vehicles:
- Cars that cannot be repaired because they are unsafe to repair. These are sometimes referred to as “statutory write-offs” or “non-repairable write-offs”.
- Cars that are repairable but which are uneconomical to repair. These are sometimes referred to as “repairable write-offs”.
These definitions apply to vehicles under 4.5 tonnes that are less than 15 years old, and include caravans, trailers and motorcycles as well as cars.
Once a car has been written off, its details are recorded in the written-off vehicle register. The register is designed to provide protection for all road users by helping them avoid buying cars that have had substantial repairs, or that have been stolen and illegally rebirthed. Rebirthing occurs when the identifying parts of a wrecked car are transferred to a stolen car, allowing criminals to sell the stolen car with another vehicle’s identity.
Who decides whether my car will be repaired or written off?
Take a closer look at the fine print on your car insurance policy and you might be surprised to learn that most policies stipulate that it’s up to the insurer whether to:
- Repair your car
- Pay you to get it repaired
- Declare your car a total loss and write it off
If your car is damaged in an accident, it’s usually in the hands of the insurance company’s assessor to decide whether the car should be repaired or written off.
When a car is written off, what happens to it?
If your car is written off, its registration is cancelled and its details entered into the written-off vehicle register in your state or territory. However, what happens to your car after that depends on why it was written off in the first place:
- If it’s written off because it is unsafe to repair. Its vehicle identification number (VIN) is recorded as a statutory write-off and the car can never be re-registered.
- If it’s written off because it’s uneconomical for the insurer to repair it. In most states and territories you have the option to apply to the relevant authority, such as VicRoads in Victoria, to have the car repaired so it can again be re-registered and driven. Once the car has been repaired, its status in the written-off vehicle register will be changed to “repaired write-off”. However, its value may be significantly affected if you try to sell it in the future.
When will a car be written off?
What does it actually take for a car to be written off? Once again, this depends on whether it’s a repairable write-off or unsafe to repair.
- If it’s unsafe to repair. This is usually the outcome if a car has suffered certain types of damage. While there are slight differences in the terminology used in the legislation in each state and territory, cars generally fall into this category if they have:
- Excessive structural damage
- Excessive fire damage
- Excessive water damage
- Excessive stripping damage
- If it’s a repairable write-off. Your car will fall into this category if the cost of salvaging the vehicle and then repairing it for road use exceeds either:
- The car’s market value before it was damaged, if you have market value car insurance or
- The sum insured, if you have agreed value cover
What to do if your car is written off
If your car is declared a write-off by your insurer, you of course have the option to accept their decision. However, keep in mind that the insurance payout you receive to help replace your car may be less than you had hoped.
This is partly because insurers consider a number of factors when determining your car’s market value, including:
- Its listed value and other current sales of the same model
- The pre-accident condition of your vehicle
- The distance on the odometer
However, your payout may also be smaller than you would expect because most car insurance policies allow insurers to reduce the amount payable by deducting:
- The excess payable on each claim
- Your car insurance premiums for the rest of the year
- The unused portion of your registration and CTP insurance. You can recover your remaining rego value from your state’s roads and transport authority, and your unused CTP from your CTP insurer
If you’re unhappy about your car being written off, you have two options:
- If the car is a repairable write-off, you can apply to the roads and transport authority in your state or territory to have the car repaired and re-registered.
- If you think the car can be repaired economically, you can challenge the insurer’s decision.
Both of these options are explained in more detail below.
Can a car that has been written off be re-registered?
Yes. If your car is a repairable write-off, that is, it has only been written off because the cost of salvage and repair will exceed its market value, you can apply to have it re-registered.
This option is available in most states and territories, so you’d need to check with the roads and transport authority in your area to find out what you have to do. For example, written-off vehicles in Queensland can only be re-registered if they’ve been fully repaired, and have passed a Queensland safety inspection and a written-off vehicle inspection.
However, in New South Wales, written-off vehicles cannot be re-registered except in very limited circumstances. To be re-registered in NSW, your car must not have any non-repairable damage, and must also fit into one of the following categories:
- The car was hail damaged, and you were the registered operator for more than 28 days before the damage occurred.
- The vehicle was inherited from a will or letters of administration.
- It was registered in your name for more than 28 days before the damage occurred.
Selling a car that has been written off
There is one very big drawback to repairing and re-registering a vehicle that has been written off: its status as a “repaired write-off” will severely hamper its resale value.
The written-off vehicle register is designed to protect consumers and prevent them buying a car that has been written off, and required substantial repairs to get back on the road. If you decide to sell the car in the future, the fact that it is listed on the register as a repaired write-off can have a big impact on how much prospective buyers are willing to pay.
What happens if a financed car is written off?
If there’s still finance owing on your car when it is deemed a total loss, the insurer is obligated to pay the financier any outstanding amount. However, in some cases there may be a shortfall between the amount paid out by your insurer and the finance amount owing, which is where motor equity insurance can help. This is designed to pay the financier the outstanding loan amount when your comprehensive car insurer’s total loss payout is insufficient to pay out your loan contract.
Can I challenge a write-off?
If the insurer decides that your vehicle is uneconomical to repair and declares it a write-off, you may disagree with the cost quoted to repair your vehicle or your car’s salvage value. If this happens you can dispute their assessment, but you only have a very short window in which to do so.
Insurers must notify the written-off vehicle register within seven days of declaring a car a write-off. Once they’ve notified the register it’s usually extremely difficult to get them to change their mind.
If you do decide to challenge a repairable write-off assessment and push for your insurer to repair the car, you’ll need to gather evidence that shows the cost of repairs or salvage value are cheaper than the market value of your car. You should gather together the following:
- Quotes from smash repairers to outline how much it will cost to repair the vehicle.
- Quotes from salvage yards that reflect the salvage value of your vehicle.
- Evidence of the market value of your vehicle from a company such as redbook.com.au or glassguide.com.au.
If you provide this information to your insurer straight away and ask them not to report your vehicle to the written-off vehicle register, it may be possible to get the assessment changed. Of course, if you’re unhappy with the way you’re treated by your insurer you can also complain through its internal dispute resolution service, and then to the Financial Ombudsman Service if necessary.