The term ‘write-off’ in insurance terms refers to a situation where the cost of repairing a vehicle after a claim has been made, exceeds the actual value of the vehicle itself. This takes into account any salvage value the vehicle has after the accident.

For example if a car is valued at 5000 units before an accident then is driven off the road, should the total estimate of repair cost 6000 units, the vehicle is then classed as a write off. As the insurer would likely be responsible for around 6000 units in cost to repair the vehicle, it makes more sense for them to issue an amount of 5000 units to the client in order for them to purchase a similar value vehicle. This way a saving of 1000 units was made by the insurer. Though some see this as unfair and believe the vehicle that was insured should be the vehicle that is paid to receive repair – it is worth noting that the more money insurance companies save overall and the less they pay out on claims, the cheaper car insurance policies will remain across the board.

In cars and vehicles that have a low estimated value, such as old cars or those with high mileage, the damage that is done in a claim may not be that major. However with a repair still requiring high price of parts and labour, the vehicle still may be classed as a write-off even though the vehicle may still function and be safe and legal to drive.

In the event of an insurance write off, if money is owed by the client for financing the car, the insurer will often need to pay the finance company any monies left on the vehicle, before the client is paid. Check on your local insurance laws to see if this affects you in a particular country. There are certain situations regarding finance of vehicles and write-offs where the outstanding loan exceeds the value of the car. Obviously the payment from the insurer will not cover the loan balance so clients can find themselves out of pocket.

In the event of a write-off, insurers will generally check clients details against fraud and finance databases, salvage company bids and research the value of similar aged vehicles to the one being claimed on. Once this is completed the insurer will offer a settlement figure which may be accepted or rejected. If it is rejected by the client, then proof will need to be sent to the insurer to explain exactly why the settlement figure was not acceptable.

Once an agreement has been made then the written off car is then property of the insurance company, who can then do as they please with the vehicle.