What happens when your car is written off

Insurers usually write a car off when the repair cost reaches a high proportion of the car's value, often when repairs plus salvage exceed roughly 60 to 70 percent of the insured value, though the exact threshold varies by insurer. A car can also be written off if it is structurally unsafe to repair, or if it is stolen or hijacked and not recovered.

How you insured the car decides your payout:

• Retail value: roughly what a dealer would charge to sell the same car. Highest payout, usually highest premium.
• Market value: roughly the average of retail and trade value. A middle option.
• Trade value: roughly what a dealer would pay for it. Lowest payout.
• Agreed value: a fixed sum set when you took the policy, common for classics or modified cars.

Check your schedule to see which one applies to you.

The settlement is the insured value of your car at the time of the loss, minus your excess and any outstanding finance the insurer settles on your behalf. Add ons like sound systems or accessories are only included if specifically insured. The insurer keeps the wreck (salvage) once it pays you out, unless you buy it back.

If the car is financed, the settlement first goes to the bank to clear what you owe. If the payout is less than the outstanding balance, you could be left with a shortfall to pay. This is where credit shortfall (top up) cover helps, as it covers the gap between the insured value and the finance balance.

If you think the offer is too low, ask the insurer in writing how they calculated it and which value guide they used. You can provide evidence of comparable cars for sale and any extras you insured. If you cannot reach agreement, you may escalate to the Ombudsman for Short Term Insurance (OSTI) at no cost.

Once you accept and are paid out, the insurer takes ownership of the salvage and the policy on that car ends. Cancel your licence and arrange new cover before you buy a replacement. If you keep or buy back the salvage, it must be re registered and may be flagged as a previously written off vehicle.

The settlement is based on your insured value basis at the time of loss:

Payout = insured value (retail / market / trade)
       - your excess
       - any amount owed to the bank (paid to them first)

So a R200 000 market value, a R5 000 excess and R150 000 still owed means the bank gets R150 000 and you receive R45 000. See our value guide for how the figure is set.

If you owe the bank more than the car's insured value (common in the first year or two), the payout will not clear the loan. Without shortfall (gap) cover, you must pay the difference yourself, even though you no longer have the car. Shortfall cover exists precisely to close that gap. Check whether you have it before you need it.