Frequently Asked Questions (FAQ) About Total Losses
Navigating the aftermath of a car accident can be a daunting process, particularly when the term “total loss” comes into play. Many drivers find themselves adrift in a sea of insurance jargon, unclear on where they stand or what steps to take next. Understanding what a total loss means is crucial, as it can significantly affect your insurance claim and financial position.
This guide aims to steer you through the often confusing waters of total loss scenarios, providing clear answers to frequently asked questions and offering guidance to motorists facing this challenging situation. Whether you’re dealing with a recent incident or simply arming yourself with knowledge for the future, our comprehensive overview will illuminate the path forward when an accident leaves your vehicle beyond repair.
1. What is the total loss process?
The total loss process, often referred to as a car being “written off,” involves several steps from the moment of the accident to the final settlement. Here’s an overview of how the process typically unfolds:
- Initial Assessment and Reporting of the Incident:
- After an accident, you should report the incident to your insurance company as soon as possible, providing all the necessary details.
- If the vehicle is not drivable, the insurance company will usually arrange for it to be towed to a garage or a storage facility.
- Inspection by an Insurance Assessor:
- The insurance company will send out an assessor to evaluate the damage to the vehicle.
- The assessor will estimate the repair costs and determine whether the vehicle is repairable or if it’s a total loss.
- Total Loss Classification:
- A car is typically considered a total loss if the cost of repairs exceeds a certain percentage of the car’s value before the accident. This threshold varies but is often between 50% and 60%.
- The pre-accident value (PAV) of the vehicle is determined by the insurance company, often using industry guides and databases to ascertain a fair market value.
- Category of Total Loss:
- If the vehicle is declared a total loss, it will be classified into one of four categories (A, B, S, or N) based on the severity of the damage. Categories A and B are for vehicles that must not return to the road, whereas Categories S and N can be repaired and potentially put back into use, subject to proper repair and re-registration.
- Settlement Offer:
- The insurer will make a settlement offer based on the PAV. You can accept the offer or negotiate if you believe the value is not representative of your vehicle’s worth prior to the accident.
- If you have outstanding finance on the vehicle, the settlement will need to cover this to clear the debt.
- Vehicle Ownership Transfer:
- If you accept the settlement, you will typically sign over the vehicle’s ownership to the insurance company.
- The insurer will then handle the disposal of the vehicle, which may involve scrapping it or selling it for salvage, depending on its category.
- Payment and Replacement:
- Once everything is agreed upon, and any necessary documentation is completed, the insurance company will issue the payment.
- You can then use this settlement to put towards a replacement vehicle.
- Retention of Personal Belongings and Plates:
- You should remove all personal belongings from the vehicle. If you have a private registration plate, you can apply to retain it before accepting the total loss settlement.
Throughout the total loss process, it’s important to maintain clear communication with your insurer. Keep records of all correspondence and ensure that you understand your rights and options at each step. It’s also advisable to consult the policy details regarding total loss as terms can differ between insurers. If you disagree with the insurer’s decision or settlement, you may involve the Financial Ombudsman Service (FOS) to help resolve the dispute.
Related Reading: The Safest Cars in the UK: 2023 Edition
2. What determines if a car is a total loss?
The determination of whether a car is a total loss is primarily based on a cost-benefit analysis conducted by the insurance company. When a vehicle has been involved in an accident, an insurance assessor will evaluate the extent of the damage and calculate the cost of repairs.
If the cost of repairing the vehicle exceeds a certain percentage of its pre-accident value, it is often deemed uneconomical to repair. This threshold can vary between insurance companies, but it typically ranges from 50% to 60%.
Factors such as the age of the vehicle, its market value, mileage, and overall condition before the accident are considered when establishing the pre-accident value. Additionally, the potential for hidden damage that could escalate repair costs is taken into account, which could also sway the decision towards a total loss classification.
Once the assessment is made, the vehicle will be categorised into one of four insurance write-off categories, which reflect the severity of the damage and the future prospects for the vehicle.
Categories A and B denote vehicles that are so extensively damaged they should never return to the road, with ‘A’ indicating that the car should be crushed without salvaging parts. Categories S (formerly C) and N (formerly D) signify that the car has sustained structural or non-structural damage, respectively, but can be potentially repaired and returned to the road.
However, this repairability doesn’t necessarily mean it’s economical or practical to do so. The vehicle’s owner must also be informed of the write-off category, as it affects the possibility of retaining, selling, or even driving the vehicle post-repair. The total loss determination is a balance of safety considerations, financial practicality, and regulatory compliance, ultimately ensuring that vehicles on UK roads are both safe to drive and economically viable to repair.
3. Can I keep a total loss car?
In the UK, whether you can keep a total loss car depends on the category of write-off it has been assigned. The write-off categories are as follows:
- Category A: The vehicle is crushed, with no salvageable parts. You cannot keep a Category A vehicle; it must be scrapped.
- Category B: The car itself must be scrapped, but some parts may be salvaged by authorised treatment facilities. As the owner, you are not allowed to keep a Category B vehicle.
- Category S (formerly C): The vehicle has sustained structural damage, but you can choose to keep it if you wish to undertake the repairs yourself. However, it will need to be properly repaired and pass a Vehicle Identity Check (VIC) before it can be driven on the road again.
- Category N (formerly D): The vehicle has not sustained structural damage, but may have cosmetic or electrical faults. You can keep and choose to repair a Category N vehicle. Like Category S, it must be roadworthy and may require a VIC to ensure it is safe to drive.
If you decide to keep a Category S or Category N vehicle and repair it, you should inform your insurer of your decision. You will typically be offered a settlement amount minus the salvage value of the vehicle. It’s also crucial to be aware that, once repaired, the history of the vehicle being a write-off will remain with the car and must be declared to any future buyers, which could affect its resale value. Additionally, some insurers might be reluctant to insure vehicles that have been previously written off, so you should check the availability and cost of insurance before deciding to retain a total loss vehicle.
Related Reading: Can I Keep My Car After a Total Loss?
4. What happens if you owe more than your car is worth and it’s a total loss?
If you owe more on your car finance or loan than the insurance pay out (the car’s pre-accident value) because it’s a total loss, this situation is commonly referred to as being in “negative equity” or “upside down” on your car loan. This can be particularly stressful, but there are a few ways it might be handled:
- Gap Insurance:
- Gap insurance is designed to cover the difference between what you owe on your car and its current market value. If you have a Gap insurance policy, it should pay out the difference, ensuring you are not left out of pocket. There are different types of Gap insurance, like Return to Invoice (RTI), Vehicle Replacement Insurance (VRI), and Finance Gap Insurance, each designed to cover specific scenarios.
- Negotiating with Your Insurer:
- If you don’t have Gap insurance, you might still be able to negotiate with your insurance company. If you believe the market value they’ve assessed is too low, you can present evidence to support a higher valuation, such as recent similar car sale prices or independent dealer quotes.
- Paying the Difference:
- If there is no Gap insurance and the insurer won’t budge on their valuation, you will be responsible for paying the difference between the insurance pay out and the remaining balance on your loan. This may mean continuing with monthly payments until the debt is cleared, even though you no longer have the car.
- Financing the Negative Equity:
- Some lenders might allow you to roll the negative equity into a new car loan. However, this would increase the loan amount for your next vehicle and could lead to a situation where you are once again in negative equity in the future.
- Financial Hardship Arrangements:
- If you’re unable to pay the difference and don’t want to or can’t roll the negative equity into a new loan, speak with your finance company about your options. They may be able to offer a hardship arrangement that could involve adjusting repayment terms.
It’s important to carefully read the terms and conditions of both your finance agreement and your insurance policy to understand your obligations and coverage in the event of a total loss. If you’re purchasing a new vehicle on finance, especially a new car that can depreciate quickly, it’s worth considering Gap insurance to protect against negative equity if your car is written off.
Related Reading: Negative Equity On Car Finance Explained: Impacts & Solutions
5. Can you apply for a car loan after a total loss?
Yes, you can apply for a car loan after experiencing a total loss with your previous vehicle. However, there are some factors that you’ll need to consider when doing so:
- Credit Impact: If you had outstanding finance on your previous vehicle that wasn’t fully covered by your insurance paynout (and you didn’t have GAP insurance), you would need to settle the remaining balance. If this results in missed payments or defaults, it could negatively affect your credit score.
- Insurance Claim Record: Your recent total loss claim may not directly impact your credit score, but it could influence how insurers view your risk profile. This might affect the insurance premiums for your new vehicle, which is an essential factor to consider when calculating your total monthly car expenses alongside your new loan payments.
- Affordability Assessments: When applying for a new car loan, lenders will assess your ability to repay the loan. This assessment will take into account your current debts, including any outstanding amount from your previous car loan, and your insurance claim history to evaluate financial risk.
- Proof of Settlement: A lender may require proof that the total loss has been settled with your insurance company, particularly if you had a loan on the vehicle that was written off. You might need to show that either the loan was paid off by the insurance payout or that you have made arrangements to settle any remaining debt.
- Loan Terms: You may find that the terms offered for a new car loan after a total loss could be different. Depending on how the loss has impacted your creditworthiness, lenders may offer higher interest rates or require a larger down payment.
- Lender’s Policy: Each lender will have its policies regarding loan approvals after a total loss. Some may be more cautious, while others might be more lenient, especially if you have a good explanation and have taken steps to mitigate the risk of future losses (such as by planning to purchase a car with advanced safety features).
It’s essential to shop around for car loans to find the best terms available to you. Consider speaking with a financial advisor or a loan officer at a bank or credit union who can provide advice tailored to your situation. Always ensure you have a clear understanding of the loan terms and your ability to meet the monthly payments before committing to a new financial obligation.
Related Reading: Do I Need Gap Insurance?
6. Can you get a new car after total loss?
Acquiring a new car after a total loss involves several steps and considerations. Here’s a step-by-step guide on how to proceed:
Settlement from Insurance:
Wait for the insurance company to assess the damage and make an offer for the settlement based on your car’s pre-accident value.
If you accept the offer, the insurance company will typically pay you the amount agreed upon minus any excess that applies to your policy.
If you have outstanding finance on the written-off vehicle, the insurance pay out will first go towards settling this debt. Any surplus may be used as a deposit for a new car.
If the pay out doesn’t cover the outstanding loan, and you don’t have GAP insurance, you’ll need to cover the shortfall yourself.
Budget and Financing:
Determine your budget for the new vehicle, considering any funds from the insurance settlement that can be used.
If additional financing is required, research your options for a car loan or consider alternatives such as leasing, personal contract purchase (PCP), or hire purchase (HP).
Check your credit score, as it may have been affected if there was a financial shortfall from the insurance payout on your previous car loan.
Research different makes and models within your budget that suit your needs. Consider factors such as reliability, fuel efficiency, insurance costs, and vehicle tax rates.
Check online marketplaces, dealerships, and car buying services to compare prices and deals.
Insurance for the New Car:
Once you’ve chosen a new car, obtain insurance quotes. Be aware that your premiums may be higher due to the recent total loss claim.
Disclose the previous total loss to insurance providers as failure to do so could invalidate your policy.
Purchasing the New Car:
When you’ve found the car you want and have arranged payment or financing, you can proceed with the purchase.
Ensure that you get all the necessary paperwork, such as the V5C registration document, MOT certificate if applicable, service history, and warranty details.
Documentation and Tax:
Register the new car with the DVLA and tax it before you can legally drive it on public roads.
Personalised Number Plate:
If you had a personalised number plate on the written-off vehicle and wish to transfer it to your new car, you’ll need to complete this process with the DVLA before the insurance company disposes of your old vehicle.
Selling or Keeping the Salvage:
If your written-off vehicle falls into Category S or N, and you decide to keep the salvage, ensure you understand the process of getting it roadworthy and re-registered.
Alternatively, if the insurance company retains the vehicle, you do not need to worry about this.
Learning from Experience:
Consider purchasing GAP insurance for your new vehicle to cover any potential shortfall in the future should the vehicle be written off.
Each step requires careful consideration to ensure you’re making informed decisions and to avoid further financial complications. It’s advisable to take your time, do your research, and seek advice if you’re unsure about any part of the process.
Related Reading: Why Buy a New Car?
7. How do you negotiate with car insurance adjusters about the total loss of your car?
Negotiating with car insurance adjusters over a total loss claim involves several steps, and it requires preparation and understanding of your policy and your car’s value. Here’s a guide to help you through the process:
Understand Your Policy:
Before entering into any discussions, thoroughly review your insurance policy. Understand the terms and conditions, especially how the company determines the market value of a car that’s been written off.
Collect evidence to support the value of your car. This can include:
- Service Records: Demonstrating regular maintenance and servicing can support a higher valuation.
- Receipts for Upgrades: If you’ve added any upgrades or made improvements to your car, present receipts as they can increase its value.
- Comparables: Find listings and sales data for similar vehicles in your area, with similar makes, models, years, mileage, and condition.
- Valuation Guides: Use reputable car valuation guides and tools that are available, such as Parkers, Glass’s, or the CAP Black Book, to show the market value.
Prepare Your Argument:
- With the evidence gathered, prepare a logical and clear argument for why you believe your car is worth more than the insurance company’s offer. This should be based on factual data rather than emotional attachment.
- If necessary, consider getting an independent professional appraisal of your vehicle. This might cost you money but could be worth the investment if it significantly increases your settlement.
Communicate in Writing:
- Conduct negotiations in writing so that you have a record of all communications. If you discuss things over the phone, follow up with an email summarising what was said.
Be Professional and Courteous:
- Always remain calm, professional, and courteous in your communications. Becoming adversarial can make the process more difficult and less productive.
Review the Offer:
- When you receive the adjuster’s offer, do not feel pressured to accept it immediately. Take time to review it against your research. If it seems too low, prepare to counteroffer.
- If you disagree with the adjuster’s valuation, present your counteroffer along with the evidence you’ve gathered. Explain why you believe your valuation is more accurate.
Understand the Finality:
- Be aware that if you accept a settlement, it’s typically final. Ensure you are completely satisfied with the amount before agreeing.
Seek Advice if Needed:
- If negotiations reach a stalemate, you might consider seeking advice from a legal professional, especially one specialising in insurance claims.
Use Dispute Resolution Services:
- If you’re unable to reach an agreement with your insurer, you can escalate your complaint. The Financial Ombudsman Service in the UK can help resolve disputes between consumers and financial companies, including insurance claims.
Remember that insurance adjusters are often negotiating within certain company parameters, so while there might be some room for adjustment, there may also be limits to how much they can increase the offer. Having a strong case with solid evidence is the best strategy to influence the outcome in your favour.
8. Can my insurance company refuse to fix my car after a total loss?
In the UK, if your insurance company declares your car a total loss, also known as a “write-off,” they typically will not offer to repair it. The decision is based on economic and safety factors. Here’s why they might refuse to repair the vehicle:
Economic Total Loss:
- If the cost of repairs exceeds a certain percentage of the car’s value (often around 50-60% but can vary by insurer), it is considered not economically viable to repair. This is because the insurer is obligated to manage the costs for the policyholders and ensure that premiums remain reasonable for everyone.
- In cases where the vehicle has sustained structural damage, it might be considered unsafe to return to the road, even after repairs. This is especially true for Category A or B write-offs, which are so severely damaged that they must never be driven again.
- Each insurance company will have its own set of guidelines for determining whether a car is a total loss. Once they’ve made that determination based on their criteria, they are unlikely to reverse the decision.
- UK law requires that vehicles meet certain safety standards. If a car cannot be repaired to meet these standards, the insurer will not fix the car due to legal compliance issues.
Insurance Policy Terms:
- The terms of your policy will outline the conditions under which your insurer will pay for repairs or declare a car a total loss. Once your car is declared a total loss, the insurer fulfils their obligation by providing a cash settlement based on the car’s market value before the accident.
If your insurance company has determined that your car is a total loss, they will typically offer you a cash settlement instead of paying for repairs. This settlement should reflect the pre-accident value of your vehicle. It’s up to you to decide whether to accept their offer or to try to negotiate for a higher settlement if you believe it undervalues your car.
If you choose to keep the vehicle (in cases where it’s legally permissible, like a Category S or N), you can use the settlement to have the car repaired independently, but this would be at your own cost and risk.
Related Reading: Look Out! Buying A Car With 0% Finance
9. Can you finance a car after a total loss?
Yes, you can finance a car after experiencing a total loss of your vehicle, provided you meet the lenders’ criteria for a new loan. After a total loss, your insurance company will typically provide you with a pay out based on the market value of your car at the time of the accident. This pay out can be used as a deposit on a new vehicle, which could potentially reduce the amount you need to finance.
However, the total loss will be noted in your claims history and may influence how insurers and lenders view your risk profile. While the claim itself shouldn’t directly affect your credit score, the financial implications of any existing car finance that wasn’t fully covered by the insurance pay out might.
If the insurance pay out doesn’t cover the outstanding balance on your vehicle finance, and you don’t have Guaranteed Asset Protection (GAP) insurance to cover the difference, you’ll need to address this shortfall, which could affect your ability to secure new finance.
When you apply for new car finance after a total loss, lenders will assess your application based on your current creditworthiness, which includes your credit score, income, employment status, and debt-to-income ratio, among other factors.
It’s crucial to check your credit report before applying for a new loan to ensure that all the information is accurate and up-to-date. If your financial situation allows, and your credit health is good, lenders may be willing to offer you a new car finance agreement.
It’s advisable to shop around to find the best interest rates and terms. Be honest with potential lenders about your recent total loss; transparency can help prevent misunderstandings and foster a better deal. Keep in mind, securing finance after a total loss might come with higher interest rates or require a larger down payment, especially if the previous loan resulted in negative equity that was not covered by the insurance pay out.
Related Reading: Click4Gap Guide to Buying a New Car
Need Gap Insurance?
There are a few different types of policy you can choose from when taking out your Gap Insurance cover with Click4Gap. These depend largely on how you intend to fund the purchase of your vehicle. So what car Gap Insurance is right for you?
If you paid cash for your vehicle, or paid a sizeable deposit, or if you financed it, Combined RTI Gap cover will pay out the shortfall between the cost of your vehicle and the market value at the point of claim, which is the amount your motor insurer will cover. This is cover that will protect you no matter if you use your vehicle for private use or for business.
If you leased your vehicle or it is under a contract hire agreement, Lease/Contract Hire Gap Insurance will cover you for the shortfall on your lease agreement, after your motor insurer settlement. If, for any reason, you change your vehicle within the first 90 days from the start date, we will also arrange to transfer your cover to your new vehicle without hassle or charge.
Related Reading: The Consequences of NOT Having Click4Gap Gap Insurance