My car has been written off by my insurer – What deductions can my insurer make from my payout?
My car has been written off by my insurer – what deductions can my insurer make from my payout?
This fact sheet is for information only. It is recommended that you get legal advice about your situation.
Emily’s car had a market value of around $8000. She took out comprehensive car insurance with BIG insurance company and was paying monthly premiums. Emily’s car was badly damaged in an accident. She was at fault. When she claimed on her car insurance, the insurer told Emily that her car is a write-off.
Emily was expecting the insurer to pay her $8000, so she was shocked when the insurer told her she was only getting $5800 because they are deducting:
- the excess
- the rest of the year’s insurance premiums; and
- the unused car registration and CTP insurance
…and they’re keeping the wrecked car.
Emily called and asked: can the insurer do that?
GOOD QUESTION… CAN THEY DO THAT?
The first step is to check your policy: the Policy Schedule and the Product Disclosure Statement (PDS). Most policies allow your insurer to reduce the final amount you receive, by taking out or keeping:
- Your excess
Your excess is your contribution to a claim. Where you are at fault, it is normal for the excess to be deducted from the insurance payout. If you dispute you were at fault, see our Making a claim on your car insurance fact sheet. Sometimes, even if you are not at fault you may still need to pay an excess it depends on your PDS and the circumstances. See our fact sheet on excesses here.
- The rest of the year’s premiums
You’ve agreed to pay for a year’s worth of insurance, even if you make your payments monthly. The total cost of your insurance (the premiums) is in exchange for a certain value of coverage, or your ‘sum insured’. When you have a total loss claim, the whole premium for the rest of the 12 month period of insurance is due.
For example: your premium is $1,200 for 12 months insurance cover over your car, which has a market value of $10,000. If you have an accident in month 2, your car is written off, and you have paid $200 in premiums but you still owe another $1000 in premiums for the rest of the year. The remainder of the year’s premiums ($1000) will be deducted from your payout amount ($10,000 – $1,000 = $9,000).
- Unused portion of your registration and Compulsory Third Party (CTP) insurance
Most insurance policies define the market value of the car as including its registration and compulsory third party insurance (in the same way as the car’s bonnet or wheels forms part of the car’s insured value).
In some states the insurer will deduct the remaining value of your unused registration and CTP insurance from your payout. You can recover your unused CTP from your CTP insurer and get a refund for your unused registration from your state’s roads or transport authority (eg: Roads and Maritime Services (RMS) in NSW). As you can recover these amounts yourself, they are not losses when deducted by your insurer. When an insurer will deduct these amounts is set out in your PDS.
- The wreck
If the car is written off the insurer will (at their discretion) either:
- Keep the wreck and pay you the sum insured; or
- Give you the option of keeping the damaged car but only pay you the value of the car less its salvage value. You should get advice before deciding to keep the damaged car as it may be difficult or impossible to re-register if it has been deemed unrepairable and is listed on the written off vehicle register (WOVR). See our factsheet on written off vehicles here.
NEED SOME MORE HELP?
See Getting help fact sheet for a list of additional resources.
If you found this helpful and have further questions, why not try our Motor Vehicle Accident Problem Solver
Last Updated: July 2019.