How do Insurers Calculate Write-Offs? A Guide to Total Loss Decision-Making
June 21, 2024

If your vehicle sustains damage in an incident, there’s a chance your insurer may declare it a total loss, or ‘write-off’. This usually happens if the damage is too severe to be repaired to roadworthy condition, or if the repair would cost more than the vehicle’s pre-accident value.

For example, if the damage sustained affects the mechanical or structural integrity of your vehicle, it might not be possible to restore it to a safe, roadworthy condition. 

On the other hand, if you drive an older vehicle, its lower market value could mean that even small, cosmetic repairs are not considered economically viable from your insurer’s perspective.

While it might sound straightforward, total loss decisions can be complex – weighing up a number of cost, safety, and efficiency factors to determine how feasible it is to repair your vehicle. 

Here we break down some of these key factors, and explore the considerations insurers make to determine whether a customer’s vehicle should be repaired, or whether it’s a ‘total loss’.

What is a ‘total loss’ in motor claims?

A write-off (total loss) car parked at the side of the road after a collision.

The term ‘Total Loss’ is used to denote a vehicle which an insurer has decided not to repair after a collision – either for safety, cost, or efficiency reasons. 

This might happen if the vehicle’s damage is too severe to be repaired in full (Beyond Feasible Repair), or if the projected cost of its repair exceeds its market resale value (Beyond Economical Repair, BER).

When this happens, the insurer will categorise the vehicle into either category A, B, N, or S – depending on the scale of the damage, and the reason for the total loss decision. 

Vehicles which are damaged ‘beyond feasible repair’ are assigned to category A or B, while vehicles which are ‘beyond economical repair’ are assigned to N or S – depending on the scale of the damage.

The category to which the vehicle is assigned will determine what happens next – whether it can be retained by the customer, salvaged for parts, or must be crushed by a licensed professional.

Read more about the different total loss categories here

How do insurers determine if a vehicle is a ‘write-off’ (Total Loss)?

Damage triage & engineering process used by insurers to determine whether a vehicle can be feasibly repaired, how much it would cost, and whether it's a total loss or write-off.

Insurers will consider and evaluate a number of factors to determine whether a vehicle can be repaired, or whether it’s a total loss/write-off. Here are some of the key considerations insurers make to inform their total loss decisions: 

1 – Calculating the vehicle’s accurate market value 

When calculating whether your vehicle is a total loss, the insurer will first need to work out its pre-accident market value – what it was worth before it sustained damage.

To do this, insurers will account for a number of valuation factors – it’s not as simple as just looking up the ‘going rate’ of the car in question.

These include the make, model, and specification of the vehicle, any previous accidents or parts replacements, its mileage, day-to-day wear and tear, and the general market value for similar vehicles.

All of these factors will influence the vehicle’s cash resale value – how much the vehicle would be expected to fetch if sold in its pre-accident condition. This is the value insurers will use when determining whether repairs are economically viable.

2 – Understanding the scale of the damage, and viability of repair

Once they’ve ascertained the vehicle’s pre-accident value, the insurer will assess the scale of the damage the vehicle has sustained. This process will be conducted by trained & qualified engineers, who will assess the damage in detail to determine which components have been affected.

When conducting this damage assessment, insurance engineers will consider:

  • Is the damage structural, or just cosmetic?
  • Is the vehicle roadworthy in its current condition?
  • Could the damage feasibly be repaired?
  • Would any parts need replacing, or could they be restored?

Once they’ve thoroughly examined all of the vehicle’s damage, and identified whether or not it’s technically repairable, the engineer will begin to calculate the estimated cost of these repairs. 

If they find the vehicle is completely unrepairable, it will be determined either a category A or B write-off at this stage (beyond feasible repair).

3 – Estimating the cost & turnaround of potential repairs

If the engineer’s assessment concludes the vehicle can feasibly be repaired, they will begin to calculate the estimated cost and timescale of these repairs, to understand whether they’re economically viable.

This means identifying which methods need to be utilised to repair the vehicle, which parts need replacing, how long it would take, and how much it’s expected to cost at the going rate.

They will usually consider a range of options – including the going labour rates of different repairers, the opportunity to utilise ‘green’ or aftermarket parts, or repair-over-replace methods like SMART repair.

The engineer will use all of these factors to produce a formal repair estimate, which is what the insurer will use as their reference from this point onwards. 

If, at this stage, the cost of repair outweighs the vehicle’s calculated market value, it will likely be categorised as a category N or S write-off (beyond economical repair, with either structural ‘S’ or non-structural ‘N’ damage).

4 – Considering other, non-repair claims costs 

Repair costs aren’t the only factor insurers will consider when determining whether a vehicle is a total loss. They will also consider additional factors affecting the total cost of the claim, which will ultimately determine whether a repair, replacement, or pay-out is most economically viable. 

These might include:

  • The need to pay for courtesy/hire cars during the repair
  • The cost of vehicle storage, transportation, inspection, or recovery
  • Any additional administrative costs associated with the claim

These costs can fluctuate drastically depending on the nature of the claim in question, and the expected turnaround of any repairs. For example, if there are long waits associated with sourcing parts for the vehicle, then the cost of storing it, and providing a hire car while it’s in storage, can quickly rack up. 

If the above factors would see the claim costs exceed the value of the vehicle, it will likely be preferential for the insurer to reach a pay-out settlement. If this is the case, the vehicle will be assigned as a category N or S total loss, depending on the scale of the damage.

What happens if my vehicle is declared a ‘write-off’?

If your vehicle is declared a ‘total loss’ by an insurer, this means they won’t be covering the cost of its repair. If your policy is fully comprehensive, or you’re the non-fault party in the incident, the insurer will usually pay out a sum close to the vehicle’s market value in lieu of it being repaired.

What happens to the vehicle itself will depend on the category to which it’s assigned:

Category N and S (formerly category C and D)

If your vehicle is a category N or S write-off (not economical to repair), it will either be sent for disposal, salvage, or sale – or you might be able to keep it, depending on the terms of your policy. This means you might be able to have it repaired privately, at your own expense, but your insurer will not be able to cover the cost.

Category A and B

If your vehicle is a category A or B write-off (damaged beyond feasible repair) it must be sent for disposal by a licensed professional. Category B vehicles may have some parts reclaimed for re-use, while category A vehicles must be crushed and disposed of entirely.

What additional total loss categories do insurers use?

Insurers use a number of categories when referring to total loss of assets in general, which are slightly different from the ‘write-off’ categories assigned to vehicles specifically. These are:

Actual Total Loss (ATL)

Actual Total Loss (ATL) describes the complete loss of an insured asset, where there’s no chance of restoration or recovery being achieved. This occurs when an asset (or vehicle) is either damaged beyond feasible repair, or stolen without possibility of recovery. If the asset or vehicle has been stolen, the insurer will usually need to allow a grace period for it to be recovered, before it can be declared a total loss.

Constructive Total Loss (CTL)

Constructive Total Loss means that the projected cost to repair an asset, or vehicle, exceed its estimated market value. Although it’s technically repairable, restoring it has been deemed financially impractical, as it would cost more than the asset would be worth even in its restored condition.

Recovered Theft Total Loss (RTTL)

This is used to denote an insured asset (or vehicle) which was stolen, and has since been since recovered, but suffered substantial damage in the interim – which is beyond feasible repair. For example, if a vehicle is stolen, then later crashed or damaged with enough severity, it may be deemed a Recovered Theft Total Loss.

In Summary

If your vehicle sustains damage in an incident, there’s a chance your insurer may declare it a ‘total loss’, or write-off.

This usually happens if the damage is too severe to repair, or if the cost of repairing the vehicle would exceed its market value.

Insurers will consider a wide range of factors in order to determine whether your vehicle can be repaired, or whether it’s a potential total loss, including:

  • Its estimated pre-accident market value
  • The scale of the damage sustained
  • Whether it can be restored to roadworthy condition
  • How much these repairs would cost
  • How long they can be expected to take
  • Additional claims costs, like hire cars of vehicle storage

Insurers use trained, qualified engineers to assess your vehicle’s damage, and the associated repair costs, in full – meaning all total loss decisions are driven by critical analysis, and accurate data.

If your vehicle is a total loss, it will either be assigned as category A, B, N, or, S – depending on why this decision has been reached. You can read more about the different total loss categories here.

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