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Does car insurance cover a write-off?

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What happens when your vehicle is written off after 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? And what should you do next to get back on the road?

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What is a write-off?

A writeoff is what happens when a car has sustained so much damage it’s unsafe to go back on the road, or it is still safe to drive but is not worth the cost to repair. While regulations may differ between states and counties, insurers in the US use something called a total loss ratio compared to legislative or internal limits to classify whether vehicles should be written off.

Total loss ratio vs total loss formula

The total loss ratio: Calculated as cost of repairs/actual cash value of the vehicle. Once the total loss ratio has been calculated, the percentage is compared to a total loss threshold or total loss formula.

Total loss threshold: This is a limit set by state or county regarding how high the total loss ratio can be before the car is considered a write-off. This number varies from state to state but generally falls between 50% and 100%.

Total loss formula: Some states don’t set a total loss threshold, so insurers use their own total loss formula to determine whether a vehicle should be written off. In this case, if the cost of repair plus the salvage value exceeds the actual cash value of the vehicle, the car is considered a write-off.

  • salvage value + cost of repair > cash value of vehicle = write-off
  • salvage value + cost of repair < cash value of vehicle = repair

State laws for total loss threshold

StateRatioStateRatio
Alabama75%MontanaTLF
AlaskaTLFNebraska75%
ArizonaTLFNevada65%
Arkansas70%New Hampshire75%
CaliforniaTLFNew JerseyTLF
Colorado100%New MexicoTLF
ConnecticutTLFNew York75%
DelawareTLFNorth Carolina75%
Florida80%North Dakota75%
GeorgiaTLFOhioTLF
HawaiiTLFOklahoma60%
IdahoTLFOregon80%
IllinoisTLFPennsylvaniaTLF
Indiana70%Rhode IslandTLF
Iowa50%South Carolina75%
Kansas75%South DakotaTLF
Kentucky75%Tennessee75%
Louisiana75%Texas100%
MaineTLFUtahTLF
Maryland75%VermontTLF
MassachusettsTLFVirginia75%
Michigan75%WashingtonTLF
Minnesota70%West Virginia75%
MississippiTLFWisconsin70%
Missouri80%Wyoming75%

Nissan Altima

For example, let’s say you drive a 2009 Nissan Altima, which is worth about $7,000 according to Kelley Blue Book. If you get in an accident that causes $5,000 worth of damage, the total loss ratio is 71%.

Going off our total loss ratio of 71%, the 2009 Nissan Altima would be considered a write-off in places like Ohio and Minnesota, but not in North Carolina or Texas.

Kelly Blue Book mentions that the salvage value of a car is roughly 50% of its original value, which works out to $3,500 in our case. Since the cost of repairs ($5,000) + the salvage value ($3,500) is greater than the actual cash value of the vehicle ($7,000), the car would be written off.

What happens after a car has been written off?

Once a car has been written off, its details are recorded with the National Motor Vehicle Title Information System (NMVTIS) as a salvaged vehicle. This registry is designed to provide protection for people purchasing used vehicles by informing them about cars that been considered salvaged, or that have been stolen and illegally revived.

However, sometimes salvaged cars can legally be brought back to life, making them a revived salvage vehicle.

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 canceled and its details entered into the NMVTIS registry. 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, you have the option to have the car repaired so it can again be re-registered and driven. Once the car has been repaired, its status in the NMVTIS will be changed to revived salvage. 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, 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 coverage

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 deductible payable on each claim
  • Your car insurance premiums for the rest of the year

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 DMV 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.

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Can a car that has been written off be re-registered?

Yes, if your car is a repairable write-off. That is, if 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, so you’d need to check with your local DMV to find out what you have to do.

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 “revived salvage” will severely hamper its resale value.

The salvaged vehicle registry is designed to protect consumers and inform them if they are buying a car that has been written off. If you decide to sell the car in the future, the fact that it is listed as a revived salvage 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 outstanding financing 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 gap between the amount paid out by your insurer and the finance amount owing, which is where gap 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 to do so.

Insurers must notify the NMVTIS within 24 hours of declaring a car a write-off. Once they’ve notified the registry, 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 repair shops 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 Kelley Blue Book.

If you provide this information to your insurer straight away and ask them not to report your vehicle to the NMVTIS registry, 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 National Association of Insurance Commissioners (NAIC) if necessary.

Bottom line

If your car is considered a total loss by your insurance company, it’s not the end of the world. You have options to prevent a total write-off, challenge the decision or report your insurer.

If you’re not happy with the result of your accident claim, compare other providers to find one who will take care of you and your vehicle better the next time you need to make a claim.

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Tim Falk

A freelance writer with a passion for the written word, Tim loves helping people find the right products for them. When he's not chained to a computer, Tim can usually be found exploring the great outdoors.

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