A vehicle is declared a total loss when the estimated repair cost is more than the present market value of a similar vehicle. Once the insurer decides that the vehicle is a write off then they take the steps detailed here.
1) The wreck will have been moved from the car repairers to a salvage yard. This is done to lessen storage costs imposed by vehicle repair shops for cars in their yards.
2) They will ask you for the vehicle documents. That is the MOT certificate if your car requires one, purchase receipts,V5 registration document, service records, keys and details of any outstanding finance. They will ask for your Certificate of Insurance to be returned. They will need the original paperwork before they settle your claim. Photocopies will be OK to start with but will slow down the process.
If you ask the insurers why they require these documents, they will probably tell you they want to check they have the right model of the car, that it possessed a valid MOT and proof of service record to make sure that is has been maintained. These are all appropriate reasons. However the insurers also need to check out your claim for fraud. Government documents have a number of anti-fraud measures designed by the issuing Government agency. A careful check on the originals will enable the claims official to establish quickly that these are indeed genuine documents and not fake. If there is doubt, they will use forensic science equipment to prove that the documents are fake or genuine. You would have to be a very clever crook to successfully forge this whole collection of documents. My advice is – let the company have the original paperwork as soon as they request them. Just sending copies delays your claim.
3) Whilst you are waiting for your settlement details, your insurers will be doing other things as well. They will enter the claim on the ‘motor insurance anti fraud and theft register’. (MIAFTR) This is a UK data base that has recorded all insurance total loss cars and stolen cars since the start of the 1980’s. It checks your vehicle against all the information in the database to see if it has ever been the subject of an insurance total loss before, or whether it has ever been stolen and not recovered. It checks against your name and address; post code; your car’s registration number and VIN (vehicle identification number). If there is a match further questions will be directed towards you, and your insurance company might enter ‘fraud investigation’ mode.
MIAFTR also as a matter of course checks your car against the Hire Purchase Information (HPI) database. If you borrowed money to purchase the vehicle and you still owe money, it will be on this database. Have no doubt your insurance company will discover it. So be honest and tell them about your outstanding balance. The loan company is the rightful owner of your car. Any settlement will be made to them whilst there is an outstanding balance. Anything left over is paid to you. Similarly, your claim will be recorded on CUE (Claims and Underwriting Exchange). This happens as a matter of course on all motor and household claims. Not all insurers subscribe but the vast majority do.
Problems can arise where the outstanding loan is greater than the worth of the vehicle. In this situation the insurance policy does not completely pay off the loan. I remember a purchase plan for motor bikes. Teenagers went into a shop, bought a new motor cycle plus all the helmets, leathers etc with finance against the value of the vehicle. The interest on the loan was outrageously high. Some time later there would be an accident and they would total loss it (or it was stolen). The value of the motor cycle was much less than the combined purchase price plus the interest. It caused a furor which was blamed on the insurance company rather than the stupidity of the youngster for getting involved in such a bad deal with the shop.
4) Your insurance company will be obtaining bids for the wreckage. The higher the salvage value the less the final cost of your claim. There has been a lot of publicity about cars which have been written off reappearing on the road, or being purchased by criminal gangs to aid their disguise of a stolen vehicle. The Association of British Insurers (ABI) have come up with a code relating to the disposal of vehicle salvage. All member companies comply with these rules. The result is that most salvage is sold by the companies to established salvage merchants. If the vehicle is damaged to an extent that meets listed criteria, it will be issued with a code that requires the vehicle to be scrapped or broken up. Vehicles with less damage can still be fixed and put back on the highway.
5) Once all of the above processes have taken place your insurers will make a settlement proposal to you.
Their engineer will have consulted the trade publications to value the vehicle, adjusting these figures to take into account the age, condition and mileage of your car, and his knowledge of the current car market. The final total that he arrives at forms the starting point of the settlement value given to you. Any policy excess will have to be deducted along with any finance still outstanding on the vehicle.
Your insurance company will make it very clear precisely how much you will get and explain any adjustments to you. If you pay your car insurance by Direct Debit, the chances are that any remaining premium will also be deducted from the settlement amount.
6) When you have accepted the offer (some insurers might need your signature to a document called a ‘form of discharge’) you will receive a cheque.
7) Your insurers then own the remains of your car and, subject to legislation and those ABI codes, can do whatever they want with it. This will undoubtedly mean that they will sell the salvage.