Laura Berry is a former State Farm insurance producer and insurance expert.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 15, 2021

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You carry insurance to protect you when you are in a collision or have an incident where you need to file a claim.

While no one ever really wants to use their insurance, it is crucial to prepare for possible scenarios before they happen to know how claims are handled and what terms mean before you receive correspondence that is full of terms you may not understand.

If you ever have to face a situation where you must file a damage claim because of a collision, theft, or vandalism, knowing what the term “insurance write off” means is essential.

Read on, and learn about the claims handling process and what it means when your car is deemed a write-off by your insurer.

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What does it mean if your car is a write-off?

You carry insurance to protect you when you are in a collision or have an incident where you need to file a claim.

While no one ever really wants to use their insurance, it is vital to prepare for possible scenarios before they happen to know how claims are handled and what terms mean before you receive correspondence that is full of terms you may not understand.

If you ever have to face a situation where you must file a damage claim because of a collision, theft, or vandalism, knowing what the term “insurance write off” means is essential.

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What does it mean if your car is a write-off?

A write-off is a term used by insurance claims adjusters to describe a vehicle retained by the carrier instead of being repaired. While this is a common term used throughout the world, in the United States, most insurers will use the term total loss instead.

They both mean the same thing in the insurance world, but it is essential to know that the two are used interchangeably.

Not all cars are considered total losses or write-offs when property damage claims are filed.

This is because many cars damaged in collisions or vandalized will only sustain a minimal amount of damage that can be repaired at an economical cost.

The cars that are damaged so severely that they are unsafe to be driven or will cost more than their worth to repair are another story.

Why is a car written off or classified as totaled?

Suppose you review your car insurance policy booklet. In that case, it states what your car is covered for and what the insurer will pay for when your vehicle is damaged. For those who carry physical damage coverage, the definition and terms of comprehensive and collision cover apply.

As you read the definitions and terms, you will see that it says that the carrier will pay for either the repair or replacement of your vehicle when it is damaged because of a listed peril.

Whether the insurer will pay for repairs or replacement depends entirely on the car’s fair market value and how much the repairs are estimated to cost.

Insurance companies want to pay as little as possible to help you recover from a loss.

It is not economically realistic to pay for repairs if these repairs add up to more than the car’s actual fair market value or actual cash value (ACV).

Some companies might even total when repairs cost less than the ACV of the car.

This happens when a car’s value is depreciated because of the loss. The repair costs and value are very close to one another.

Some carriers may be justified in writing off cars damaged so severely that repairs cost 75% of the ACV. For example, this means that a vehicle valued at $10,000 could be considered a write-off if the repairs cost $7,500.

What threshold does your insurer use?

The criteria for write-offs and when the car is eligible for repair can vary from company to company. This information will more than likely not be disclosed in your policy terms, but you can discover it on your own as a wise consumer by making a quick phone call.

Ask what the total loss ratio is and what limits are set by the claims department so that you can see if the insurer is complying with state law.

If you have filed a damage claim and the insurer has not complied, knowing the state law could support your appeal and help you file a complaint. You can find a list of the Total Loss Threshold allowances in each state by clicking here.

It is essential to check with your insurer about valuation and thresholds used for write-offs before you ever need to file a claim. Still, if you are in the process of dealing with a total loss claim, it is not too late to learn before signing on any dotted lines.

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When are cars more likely to be write-offs?

A car can be written off by your insurer or by the other party’s insurer. The company that has a say is the one that will be responsible for paying out the loss. Some cars are much more likely to be deemed total losses because of their value.

While models retain their value very well, older vehicles are classified as write-offs much more often than newer vehicles. This is because older cars that are not as valuable and still cost just as much to repair will usually be totaled even when just one of the vehicles needs repairs.

After a vehicle is written off, they are issued a salvage title. A big reason older cars are salvaged is that it does not take as much damage to be total losses.

The cost to replace a fender may be the same for a new and an old car, but the cost of that fender could be the entire value of the vehicle when the vehicle is ten plus years old. So if you are driving an older vehicle around, learning about car insurance write-offs could prepare you if you need to file a claim.

What happens when a car is found to be a write-off?

You have rights as a policyholder. Knowing these rights is imperative when your claims adjuster calls to tell you that your car is totaled. The insurer still must pay you, and how you are paid depends on whether or not you want to keep your vehicle. Here is a brief explanation of the process so that you know what you should expect:

The Car is Valued and Repair Costs Estimated

Claims adjusters need to assess vehicle repair costs and valuations before defining a car as a total loss. For example, suppose the adjuster says that the repair costs are beyond the Total Loss Threshold allowed in the state. In that case, you have the right to review the information they used to conclude.

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Disputes on Vehicle Valuation

It is not typically the repair estimates but instead the valuations of the car that insurers and vehicle owners disagree on. If you disagree, you have the right to have value reassessed by an unbiased party.

If your insurer pays the claim, you can hire an appraiser and then have the appraisal averaged with the insurer’s appraisal. If the other party pays the claim, you can seek payment through your collision coverage and have your insurer pursue reimbursement to avoid a lawsuit.

Your insurer is in business to help you recoup, and this is why they will pay when you have collision coverage.

Choosing Between Replacement and Retaining Your Car

How much you will receive for your damage claim depends on what you decide to do with your car. For example, suppose the vehicle is totaled, and you sign it over to the insurance company to retain. In that case, you will receive the fair market value of the car or comparable vehicles in your area.

Some companies may even give you additional money to buy a replacement if written into the policy as a perk.

You also have the option to keep your vehicle if you feel like it can be repaired and still be safely driven on public roads.

Suppose you decide that you want to keep your write-off. In that case, the insurer will calculate the car’s value and then subtract the salvage value of the vehicle from the total amount of the settlement.

This amount is subtracted because it is how much the insurer can recoup for the car when they sell it at auction.

You will then have to apply for a salvaged title if you are the titleholder and will be asked to report the totaled car to the Department of Motor Vehicles for an updated registration.

Many people know they need insurance, but they do not see how their insurance will work until they file a claim. Dealing with everything can be stressful when you do not understand how everything works if you have a total loss.

It is time to shop around for those who are not happy with your insurer and how they dealt with a claim.

You can compare premiums and then research insurers using unbiased rating tools that will give you instant rates quotes through only reputable companies. Start quoting, and find an insurer you can trust. Use our FREE tool below now!