WHAT DOES IT MEAN TO HAVE YOUR CAR WRIT­TEN OFF?

CityPress - - Business -

When Gabriel was in­volved in an ac­ci­dent, he was told by his in­surer that it was not vi­able to re­pair his 2006 Audi, and that the car would be “writ­ten off”. The in­surer paid him out the book value of the car – R76 000 – but re­tained the dam­aged ve­hi­cle.

The chal­lenge for Gabriel is that, tech­ni­cally, he could buy an­other 2006 Audi with the in­sur­ance pay­out, but he is un­likely to do so as a 13-year-old sec­ond-hand car will prob­a­bly come with a whole lot of prob­lems – es­pe­cially if you are not fa­mil­iar with the his­tory of the car.

At the end of the day, he is go­ing to have to spend more money than he has been paid out, leav­ing him un­ex­pect­edly out of pocket de­spite hav­ing com­pre­hen­sive in­sur­ance.

He is also frus­trated that the in­surer kept his dam­aged car.

“I was told I could buy it back from them and have it re­paired if I wanted to, but that they now owned my car. It doesn’t make sense that they get to keep my as­set. Is this cor­rect? Are they al­lowed to do that?”

City Press spoke to short-term in­sur­ance com­pa­nies San­tam and MUA In­sur­ance Ac­cep­tances, nei­ther of which were in­volved in the claim, to un­der­stand what the in­dus­try norm is when it comes to writ­ten-off cars.

HOW IS A WRITE-OFF DE­TER­MINED?

This can be a de­bat­able point be­cause the in­sur­ance com­pany’s asses­sor ul­ti­mately makes the de­ci­sion about the value of the re­pair, or whether ir­repara­ble struc­tural dam­age has oc­curred. Panel beat­ers that are con­tracted to in­sur­ance com­pa­nies may charge more than your lo­cal re­pair shop, thereby reach­ing the write­off point sooner.

While you can ques­tion the quote, the in­surer is un­likely to agree with you.

Dawie Loots, CEO of MUA In­sur­ance Ac­cep­tances, says in­sur­ance com­pa­nies work with ser­vice providers that of­fer a guar­an­tee on the work per­formed, which might not al­ways be ac­ces­si­ble to a client in their own ca­pac­ity.

Ac­cord­ing to Loots, in­sur­ers cal­cu­late the write-off rate dif­fer­ently and each has their own method of es­tab­lish­ing when a ve­hi­cle will be writ­ten off. An in­surer sets a thresh­old based on the in­sured value of eco­nomic sense to re­pair it, but also where the ex­tent of the dam­age in­cludes se­ri­ous struc­tural de­fects that could af­fect the safety of the ve­hi­cle if it con­tin­ues to be driven.

WHY DOES AN IN­SURER KEEP THE CAR?

Ac­cord­ing to Melville, the prin­ci­ple of in­sur­ance is to put the in­sured in the same fi­nan­cial po­si­tion that they were in im­me­di­ately be­fore the loss or dam­age oc­curred.

San­tam’s pol­icy is to ac­quire own­er­ship of the wreck un­der a prac­tice called sub­ro­ga­tion as it “serves to avoid un­just en­rich­ment of the client be­cause the client was al­ready fully com­pen­sated for the loss of the ve­hi­cle”, says Melville, who ex­plains that if the client also re­ceived money from sell­ing the parts of the ve­hi­cle, they would be over­com­pen­sated.

Ac­cord­ing to MUA, this sit­u­a­tion is called “bet­ter­ment” and is specif­i­cally ex­cluded by in­sur­ers, and is stan­dard pro­ce­dure.

WHAT YOU NEED TO KNOW

Choose in­sur­ance plan: The “re­tail value” is the price that a dealer would sell the car for and is linked to a cen­tral data­base of re­cent sale prices. This is the clos­est you can get to the full re­place­ment cost.

You may want to cut pre­mium costs by insuring at “trade value”, which is the price a dealer would pay you if you sold your car to them, but you would re­ceive less money than if it was in­sured at re­tail value.

“Mar­ket value” is what a will­ing buyer is pre­pared to pay a will­ing seller, and usu­ally falls be­tween the trade value and re­tail value.

The less you in­sure it for, the greater you will be out of pocket if your car is stolen or writ­ten off.

Have emer­gency funds: Ir­re­spec­tive of whether your car is re­paired or writ­ten off, you will have to pay an ex­cess fee un­less the ac­ci­dent was not your fault, in which case your in­surer can claim the ex­cess from the other driver.

If your car is stolen or writ­ten off, it is un­likely you will re­place it with ex­actly the same model, so you may end up fork­ing out ex­tra money. You could take out car fi­nance, but if you want to re­main debt-free, you would need to have some funds avail­able.

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