If there are two things that seem to cause more confusion among car buyers and owners  than anything else, it’s how car insurance works along with how and why insurance companies write off cars. So when you combine the two, head scratching galore is guaranteed.

First off, a quick refresher. To drive legally on public roads your car must be insured, and to make sure your cover isn’t cancelled in the event of a claim, you must not tell any porkies when taking out the policy. Lie during that conversation, or deliberately fail to disclose anything that might affect your policy, and your insurer could refuse to pay out in the event of a claim.

When it comes to write-offs, things are quite complicated. Earlier this year we spilled the beans in a blog on the various categories of write-off, which also explained why cars are written off so readily by insurance companies.

There’s a crucial thing to bear in mind when an insurance company works out how much it’ll cost to fix a car after it’s been crashed – it will insist on doing everything by the book with no corners being cut. New parts will be used, the work will be done by a professional bodyshop and when the car is finished it’ll come with a warranty.

With hourly rates so high, and new car parts being expensive, it doesn’t take long for the charges to rack up. So it’s no wonder cars can be written off after a relatively low-speed shunt, especially if they’re getting on a bit, so they’re not worth very much.

Insuring a car that’s been written off

When you insure a car, you’re asking your insurer to take quite a big risk. If you get it wrong behind the wheel you’re asking them to pay out potentially a huge sum of money, in return for just a small amount of cash from you (your insurance premium).

Understandably, your insurer will want to minimise the risk you pose – that’s why insurance companies don’t like to cover people with a poor driving record. But it’s not just drink drivers, serial speeders or those who regularly make contact with the scenery that give insurers the jitters. They can also get nervous when it comes to cars that have been modified or crashed.

After all, if a car isn’t exactly as it was when it left the factory – in terms of condition or specification – how does your insurer know it’s safe? That’s the dilemma it faces when asked to cover a write-off; what are the guarantees that the car has been fixed properly?

Before answering this question, it’s worth revisiting the different categories of write-off. There are four of them (A, B, C and D), with the first two fit for scrap only and the second two able to be repaired and returned to the road – legally, if not necessarily on a financially viable basis. As a result, insurers will cover only category C or D write-offs.

Let’s take a 10-year old Ford Focus as an example. It’s worth £2,000 and a very light front-end shunt damages a wing, a headlight and the bonnet. Replacing these with new parts, fitted and painted, might cost £1,800 through a bodyshop – which is almost as much as the car is worth. But use second-hand parts from a scrapyard and do the work yourself, and the car could be back on the road for under £200, or just 10 per cent of the ‘official’ cost.

The car may have suffered only cosmetic damage to be written off and for a very small outlay it can be safely returned to the road. But not all cars are crashed lightly and if the damage is structural an insurance company can be taking a big risk covering it, if it isn’t repaired professionally.

To protect themselves against covering deathtraps, an insurer can insist on an engineer’s report before offering cover. By getting a vehicle independently scrutinised by an expert, an insurer knows if proper repairs have been carried out.

When analysing a car, an engineer will check the car’s structural condition, the mechanicals and the electrics too, to make sure they’re all functioning properly. However, not all insurers insist on an engineer’s report; some are content with a current MoT to prove that the car is roadworthy.

We asked DirectLine and LV how they deal with write-offs, and neither asks about a car’s crash repair history when cover is taken out; they don’t request an engineer’s report either. But in the event of a claim, both will make sure that its history wasn’t a factor in it being involved in a crash.

So if you’re worried that you could unwittingly buy a car that’s been written off, insure it then have your insurance cancelled for non-disclosure in the event of a claim, you’re unlikely to come unstuck. That’s because you probably won’t be asked about your car’s crash history, although some insurers will cross-check its registration against a database when you take out a policy, to see if it’s ever been written off. They’ll probably still cover it though, as long as it’s got an MoT.

However, in the event of you making a total loss claim for your car (because it’s stolen or crashed beyond economical repair) and it’s registered as having been written off previously, it could be argued that it’s worth less than an equivalent car that’s never been crashed. In which case you might receive a smaller payout to reflect its reduced value. After all, insurance companies pay a car’s market value, not its purchase price. So if it’s worth less than you think because it’s previously been written off, the payout will be reduced.

If you’re wondering how you can protect yourself against all this, the answer is simple. Just invest in an HPI Check before you buy any used car, so you know its history – it really is that simple.

Richard Dredge

September 2016