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What happens if your car is a total loss?

By  AAMI

For many Aussies, owning a car is a rite of passage. For some, it’s a practical necessity. For others it’s simply something they’ve always dreamt of. Whether it’s your first car, a family car, your all-time-dream-car or a project you’re working on — it’s important to know what happens if you’re involved in an accident and your car is written off as a total loss.

What is the process to claim?

If your car is damaged in an incident, you can just lodge your claim online or over the phone - including dates, times, photos and other required info. From here, your insurer will let you know how long it will take for them to get in touch, what the next steps will be, and whether the car can be repaired or is likely to be written off — that is, declared a total loss.

This is where the difference in write offs will come in.

Repairable write off

If your insurer tells you that your car is a repairable write off, then your car could technically be repaired, but the cost to do so would be more than your vehicle is worth, or is insured for. Whether your car is declared a repairable write off can depend on whether your car has been insured under ‘market value’ or ‘agreed value’.

In this case, the insurance company would most likely pay you the amount the car was insured for, minus any deductions*, and write the car off.

Statutory write off

Unlike a repairable write off, a car that’s declared a statutory write off is damaged so heavily that it can never be driven safely. This is regardless of any potential repairs, either cosmetic or mechanical – this car will never be on the road again. In this case, the insurer would pay you the amount the car was insured for, and enter the VIN and further details of the vehicle into the written off vehicle register (WOVR) so that it can never be sold, used or registered again. 

Who pays for the damage?

It can depend on the type of insurance you have and who was at fault. For example, if you have Comprehensive Car Insurance and you were at fault, you will need to pay your excess, but your insurance provider will cover the cost of your vehicle. If another party was at fault, you may not need to pay your excess or any costs towards the repair or write off of your vehicle, as the other party or their insurer should be responsible. This however is dependant on the specific claim details.

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How is the value of the car and my payout determined?

Depends! If your car was insured for an ‘agreed’ value, on which you and your insurer agreed when you took out your policy, that’s how much you’ll be paid — minus any applicable expenses, such as an excess. If you insured your vehicle at a 'market value', the payout amount will depend on factors such as age, mileage, condition and more. Please refer to the PDS for definitions and more information.

 

What happens if I disagree with the valuation?

Generally, insurers will use their network to get repair or salvage quotes for your car. This may not necessarily align with what you think your vehicle is worth - so you can dispute it, but you’ll need to do it quickly. There are obligations for insurers to report written off vehicles within 7 days from the total loss assessment.

Your best bet at disputing a valuation is to gather as much evidence as you can to support your claim – this could be things like quotes from wreckers, smash repair shops, and even the market value of your vehicle online. If you find that the value the insurer has given you is lower than others, let them know straight away.

This may not always work and you need to make sure you’re prepared for the news that your car could still be written off or priced at a lower value.
 

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What if I owe money on the car?

If money is still owed on the vehicle through financing, the insurer is legally obligated to pay the remaining amount. However, if the amount paid out for the car is less than the amount owed, you’d have to pay the outstanding amount. If it’s more than the amount owed, you’ll receive the excess amount.

If you used a bank loan, or parts of a loan, to fund your car purchase previously, you will be paid out the value of the car and you could use the payout toward paying this debt off. 

 

Can I keep the car or buy it back?

Technically yes, if this is offered on your policy. This depends on the state you live in though, as this differs in NSW. You can read more about this on your relevant government website1. Otherwise, if an insurer writes off your car and they don’t have a 'new car after total loss' policy addition – you could ask for the opportunity to purchase the wreck. You will need to discuss that option with the consultant or assessor at the time, as they can walk you through what will need to be completed on the car and the damage at hand.

Read more:

*Deductions include things like your excess, remaining premiums and your unsured CTP.
1NSW Government Written Off Vehicles Register: https://www.nsw.gov.au/topics/vehicle-registration/written-off-vehicles.


Insurance issued by AAI Limited ABN 48 005 297 807 trading as AAMI. Read the Product Disclosure Statement before buying this insurance. Go to aami.com.au for a copy.The Target Market Determination is also available. The information is intended to be of a general nature only. We do not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.