Has Your Car Been Totaled? Vehicle Write Offs And Total Loss Insurance Claims

Mar 29, 2018

Car write off and insurance

So, your car is a write off. The vehicle is deemed a total loss by insurance. This can be surprising news for many drivers after a car accident. Even seemingly minor accidents can result in a total loss determination by your insurance company.

Car write offs after an accident are fairly common in Canada. It’s estimated by Claims Canada that 17% of physical damage claims result in a car being deemed a total loss.

Here we will discuss what a write off/total loss is, what happens in these situations, how your car value is determined and common questions about write offs and car insurance coverage.


What Is An Insurance Write Off For A Car After An Accident?

After a car accident your vehicle will be assessed by a claims adjuster for damage. If the total cost to repair the damage is greater than the current value of your vehicle it will be deemed a write off, or total loss, by your insurance company. In the case of a write off, it doesn’t make financial sense for an insurance company to pay for repairs.


What is a Total Loss In Insurance?

Totaled car and insurance

A total loss is a term used by insurance companies to refer to a write off. Total loss refers to vehicles that are damaged beyond repair. Repairs would cost more than the actual cash value of the vehicle.

Insurers use factors such as repairs costs, salvage, safety and financial considerations for damage estimates and repair timelines.


If Insurance Company Says My Car Is A Write Off What Happens Next?

What happens when an insurance company totals your car? It depends on a number of situational factors, namely the accident details and your insurance coverage.

At Fault Accident and Total Loss

If you are found to be at fault for the accident, your claim will fall under your collision coverage (If you have it). In this situation, your insurer will pay the cost to replace your vehicle. The payout will be based on your vehicles current market value, minus your deductible.

Not At Fault Accident and Total Loss

If you are not at fault, your claim will fall under direct compensation property damage (DCPD) . Again, you will be paid a cash settlement based on your vehicles current value.


Car Insurance Write Off Procedure

Car insurance and write off value

Most insurance companies follow a similar process to write off cars :

  • File an accident claim : After an accident, you file a claim with your car insurance company.
  • Repair estimate : The vehicle is examined and an estimate of the cost to repair damage is determined.
  • Calculate vehicle value : The actual cash value of your vehicle at the time of the accident, minus its value as salvage, is calculated.
  • Write off determination : Your insurance company will use a car write off calculation to determine if the vehicle is a total loss. If your vehicle can be repaired, your insurer will pay to repair the damage.
  • Settlement : You will be paid a cash settlement based on the actual cash value of your vehicle in your local market.
  • Replacement : You use the settlement money to replace your vehicle.

How Does Your Insurance Company Decide Whether to Repair Your Vehicle or Declare It a Total Loss?

Determining whether to repair a vehicle or deem it a total loss is rather simple. If an insurer determines the cost to repair damage to your vehicle is close to or more than your vehicles value, then it will be considered totaled.

The actual cash value is based on the price your vehicle would have sold for in your city. So, if you live in Toronto, they will use the average sale price for your vehicle in Toronto. If you live in Ottawa, they will use the price in Ottawa, and so on.

Factors To Determine The Actual Cash Value Of Your Vehicle

Insurance companies consider a number of factors to determine the actual cash value of a vehicle:

  • Vehicle type : The make, model, and year
  • Customization : Extra or custom features and equipment added to your vehicle
  • Kilometer : The number of kilometers the vehicle has been driven
  • Condition : The current condition of the interior, exterior, engine, and tires
  • Sale price : The current selling price for similar vehicles sold in your local market

Car Write Off Calculator

Most insurance companies use a similar car write off calculation. It’s based on repair costs and vehicle valuation.

Use this total loss vehicle value calculator to determine a write off :

Actual Cash Value (ACV) – Repair Costs + Salvage Value :

If, Repair Costs + Salvage Value > ACV = WRITE OFF

If, Repair Costs + Salvage Value < ACV = REPAIR

For example, let’s say the actual cash value of your vehicle is $7,000. The cost to repair your vehicle is $9000. Using the car write off calculator :

$7000 - $9000 = - $2000

In this situation you vehicle would be a total loss because of the value is less than repair costs. In general, your insurance company will pay the lower amount when they compare repairs or cash value.

If repair costs are close to the current market value (about 80% or higher) your insurer may still consider it a write off, even if it’s less than the market value.

Your insurers also factors in other costs associated with the claim – rental cars, claims services, and other costs.


How To Negotiate With Insurance Adjuster For A Total Loss

Total loss and car insurance claims

Many drivers are not aware they can and should negotiate a total loss settlement with their insurance company. Here are some tips to negotiation a write off settlement :

  • Understand how the total loss claims process works : It’s important for you to understand how your insurer arrived at a settlement number, and whether or not it’s fair.

  • Don’t immediately accept the first offer : You do not have to accept the first cash settlement amount offered.

  • Do your own research : Do some digging to see what the actual cash value of your vehicle is in your market. Look at selling prices for similar vehicles, consult local car dealerships, check out auto TRADER, Kijiji, and check out automobile valuation tools.

  • Get advice from your broker : Your insurance broker is a great source of advice. They can help you with your claim and help you negotiate with your insurance company. Give them a call.

  • Speak with your claims representative : Once you’ve done your research, speak with your claims representative and provide them with a counter offer to hopefully come to an agreed upon settlement amount.

What Can You Do If You Haven’t Been Offered a Fair Cash Settlement?

If negotiations with your insurance adjuster go unresolved and you are not happy with your cash settlement, you have the right to seek arbitration.

According to the Financial Services Commission of Ontario :

“If you still disagree over the value of the vehicle, or its contents, or the nature, amount or cost of any repairs, the matter can be settled by an appraisal under the Insurance Act. Your request for an appraisal must be made in writing, and your insurance company must participate. The insurance company can also make this request in writing, but you have the choice whether or not to agree to participate. For this process, each side will appoint an appraiser, and both appraisers will either agree on a value, or if they disagree, will both agree to appoint an umpire who will make a final decision on the matter.”

My Insurer Deemed By Car A Total Loss – What If I Don’t Agree?

If you disagree with the total loss determination by your insurer, and believe it can be repaired cost effectively, you have the right to file an appeal. You can request an appraisal appeal under the Insurance Act.


My Car Is A Total Loss – When Will I Get A Vehicle Write Off Check?

Once you reach a settlement with your insurance company you will receive a cheque for the agreed upon vehicle write off value, minus your deductible (if applicable). The amount of time it will take to receive your total loss payment varies. Speak with your insurance company.


How To Get A New Car After Total Loss

When is a car a write off for insurance?

It is your responsibility to purchase a replacement vehicle once you receive your settlement money. Your car insurance write off value may or may not fully pay to replace your vehicle with a comparable alternative. It depends on your insurance policy and whether the vehicle is owned, financed or leased.

New Cars, Accidents and Write Offs

We all know new cars lose value as soon as they roll off the lot. But, you can protect yourself from significant value loss and a lower valuation if your car is a total write off. How? You can add the OPCF 43 / 43A Removing Depreciation Deduction waiver to your policy.

A limited waiver of depreciation endorsement ensures your new vehicle (usually 2 years old or less) is protected against depreciation in the event of a total loss. Your insurer will reimburse you the full value you paid for your vehicle. This money can be used to purchase a replacement.

Without this endorsement, you will be paid the depreciated value of your vehicle for a total loss claim.

Total Loss When You Own The Vehicle Outright

If your vehicle is fully paid off, you will receive a cheque for the actual cash value of your vehicle, minus your deductible. You will use this money to purchase a replacement vehicle.

Total Loss And Lease - How Does It Work?

If your vehicle has been totaled, contact your lien holder. This is the company you leased the vehicle from. In most situations, your insurance company will send a cheque directly to your leasing company for the current market value of the vehicle.

If your lease amount is more than the settlement cheque, you are required to pay to remaining balance of our lease out of pocket. You will have to negotiate the repayment terms with your lease company.

Car Write Offs When You Still Owe Financing

Most drivers finance new vehicles. With the length of car loans increasing it is common for drivers to still be on the hook for financing costs if a car is totaled.

In some situations, the market value of your vehicle is less than you still owe your financing company. This can leave you “upside-down” – owing more than your vehicle is worth.

In addition to finding a new vehicle, you will also be required to pay the balance owning on your car loan. You may be able to roll it into a new car deal.

Here’s an example of a total loss situation :

Let’s say your vehicle market value is $10,000 and you still owe $12,000 on your loan. If your car is totaled, you will still owe your financing company $2000. The $10,000 settlement cheque will be paid to the finance company. You are responsible for paying off the remaining balance on your loan.

To avoid a situation where you still owe money on a car that has been totaled, consider gap insurance.


How Does Gap Insurance Work After A Car Is Totaled?

Gap insurance can come in handy when your vehicle gets totaled. If you owe more on your lease or financing agreement then the actual value of your vehicle, gap insurance will cover the difference. It will ensure you don’t have to pay out of pocket and it will cover the remaining balance of your lease or auto loan.


Write off Car FAQs

How to negotiate with insurance adjuster for total loss

Here are some commonly asked questions about car write offs and total loss claims :

Can You Keep Your Car If Its Totaled?

Yes. You can negotiate with your insurance company to keep your car if it is totaled. As part of your settlement, you will be paid the actual cash value of your vehicle, minus the deductible and the value the car could be sold for as salvage.

How Much Do Insurance Companies Pay For Totaled Cars?

The amount insurance companies pay for totaled cars depends on many factors, including vehicle type, condition, and current market value.

Is My Car Worth Less After An Accident?

Yes. Any vehicle that has been involved in an accident will have a lower value compared to the same model of vehicle that is accident free.

How Much Damage To Write Off A Car?

The amount of damage required to write off a vehicle must be close to or exceed the current market value of a vehicle.

When Is A Car Written Off By Insurance Company?

A vehicle will be written off by an insurance company when it does not make financial sense to pay for repairs. A vehicle will be written off when the repairs cost as much or more than the actual value of the vehicle.

Will I See An Increase In Insurance Premium After A Total Loss?

Yes. You could see an increase in your insurance rates if you are at fault for a total loss accident claim. If the accident was not your fault, your rates will not increase.

How Does A Total Loss Insurance Claim Work?

A total loss insurance claims works similar to any other car accident claim. Report the accident to your insurer, have the damage assessed, and if the vehicle is deemed a total loss, you will receive a cash settlement for the value of the vehicle.

Can A Totaled Car Be Repaired?

It depends on the type of damage. If most of the damage is done to the body of the vehicle it’s possible. But, in most cases it will not make sense financially to repair the vehicle.

Experience a total loss? Have questions about the claims process? Need advice? Contact a ThinkInsure car insurance broker today!


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