UK Car Assurance - We Detail The Complete Process

A car is declared a total loss when the cost of repairing it is greater than the present market value of a similar car. Once the insurance company decides that the car is a total loss then they take the steps described below.

1) The vehicle will have been moved from the repairers to a salvage merchant. This is done to reduce storage costs imposed by vehicle repair shops for cars in their compounds.

2) The insurers will ask you for the vehicle documents. That is the purchase receipts,V5 registration document, keys, MOT certificate if your car requires one, service records and details of any outstanding finance. They will ask that you return your certificate of insurance. They will require the original paperwork before they settle your claim. Photocopies will be ok to start with but will slow down the claim process.

If you ask them why they want these documents, they will likely tell you they want to ensure they have the right model of the car, that it had a valid MOT certificate and some sort of a service history to make sure that is has been maintained. These are all valid reasons. However the insurers also want to validate your claim for fraud. Government documents have a number of anti-fraud measures built into them by the issuing Government department. Careful perusal of the originals will help the claims official to quickly determine that these are indeed genuine documents and not fake. If there is any doubt, they will use forensic science equipment to validate that the documents are fake or genuine. You would need to be a very clever forger to forge successfully this whole collection of documents. I would suggest that you let your insurers have the original paperwork as soon as they ask for them. Your claim will be delayed if you send copies.

3) Whilst you are awaiting your settlement details, your insurance company will be doing further checks as well. They will record your claim on the 'motor insurance anti fraud and theft register'. (MIAFTR) This is a UK data base that has been recording all insurance written off cars and stolen cars since the early 1980's. It checks your car's details against all the information in the database to see if it has ever been written off before, or whether it has ever been stolen and never recovered. It checks against your name and address; post code; your vehicle's registration number and VIN (vehicle identification number). If there is a match further questions will be asked of you, and your insurance company might enter 'fraud investigation' mode.

The motor insurance anti fraud and theft register also as a matter of course checks your vehicle against the HPI (Hire Purchase Information) database. If you took out finance to buy the vehicle and you still have an outstanding balance, it will be on this database. And your insurer will find it. So be truthful and tell them about your outstanding debt. The finance company is the legal owner of your vehicle. Any settlement will be made to them whilst there is an outstanding balance. Whatever is left goes to you. Similarly, your claim will be recorded on the Claims & Underwriting Exchange (CUE). This is done as a matter of course on all vehicle and house insurance claims. Not all insurance companies subscribe but most of them do.

Problems can arise where the outstanding balance of the loan is greater than the value of the car. In this situation the insurance policy does not completely pay off the loan. I recall a purchase plan for motor cycles. Youngsters went into a dealer, bought a new bike plus all the helmets, leathers etc with finance against the value of the bike. The interest on the loan was incredibly high. A short time later they would have an accident and they would write it off (or it was stolen). The value of the motor cycle was much less than the total purchase price plus the interest. It caused a furor which was blamed on the insurer rather than the stupidity of the motorcyclist for entering into such a bad deal with the motorcycle dealer.

4) Your insurer will be getting bids for the salvage. 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 declared a total loss finding their way back on to the road, or being purchased by criminal gangs to aid their disguise of a stolen vehicle. The ABI (Association of British Insurers) have issued rules concerning the disposal of vehicle salvage. All member companies adhere to these rules. The result is that most salvage is sold by the insurers to established salvage dealers. If the vehicle is damaged to an extent that meets certain criteria, it will be stamped with a code that makes it illegal to repair the car and return it to the road. Vehicles with less damage could still be repaired and put back on the highway.

5) Once all of the above processes have taken place your insurance company will make a settlement proposal to you.

Their engineer will have consulted the trade publications to value the car, adjusting these figures to take into account the age, condition and mileage of the vehicle, and his knowledge of the local 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 insurer will make it clear to you exactly how much you will get and detail any adjustments to you. If you pay your premium by Direct Debit, the it is likely that any remaining premium will also be deducted from the settlement cheque.

6) When you have accepted the value (some insurers might request your signature to a document called a 'form of discharge') you will be sent a cheque.

7) Your insurance company then own the remains of your vehicle and, subject to legislation and the ABI rules, can do what they want with it. This will always mean they will sell the salvage.