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The Best Way To Deal With a Third Party Insurance Claim (Part 2)

Sean O'Meara 19/02/2013 09:05:01

The Best Way To Deal With a Third Party Insurance Claim (Part 2)

Here's the second of our three part series on avoiding losing money during a third party insurance claim. In part 1, we covered responding to enquiries and compensation offers.

Dealing with Write Offs

Even if the damage to your car is minor or cosmetic, there is a chance that it will be written off. In fact, unless your car is under three-years-old, the chances are that the cost of repair will match or exceed the pre-accident value. This is because the approved repairers favoured by insurance companies are large operations with big overheads. They calculate the repair costs for your car based on their own labour costs, assuming each part is brand new and sourced from the manufacturer.

Unfortunately, it is the insurer's choice whether or not to write off your car. They won't take into account low mileage, scarcity of a particular model, service history or sentimental value. So if you spent six months finding that dream car with low mileage and full service history, this hard work will be wiped out with the strike of an assessor's pen.

Responding to a Settlement

There are five write off categories - A, B, C, D and X - and each has important implications. If your car is written off, you will receive a settlement offer. You don't have to accept the first settlement offer, no matter how much pressure you feel under.

If you have a courtesy car, the insurer may apply additional pressure to accept the money by saying they'll charge you for hire costs after the settlement. In fact, the cost of supplying a courtesy car normally influences the decision to repair or write off a car.

Explain that you will return the car when you receive a satisfactory offer. Put this in writing if necessary. You are entitled to a courtesy car for as long as your car is off the road or until you have the funds to purchase a replacement, whichever comes sooner.

Despite all of the care and attention shown to you in the early stages of the process, the insurance company are now at the stage where they want to close the claim and limit their costs. This is why it's smart not to accept any compensation offers until you have a chance to review the settlement offer.

If the car is a Category A or B write off, unfortunately you'll never see it again as it is deemed unrepairable and will be crushed. In such cases, you will be offered market value for your car. This is where you have to negotiate as hard as possible. Consider hiring your own assessor if you feel the insurers are massively under valuing your car.

If the car is a Category C write off, things can become very tricky. Category C write offs are repairable, but the cost may exceed the value. In Category C write off cases, the insurer will most likely offer you a partial cash settlement, plus your car - typically market value minus salvage value. So if your car is worth £3,000 and the salvage value is £300, you'll get £2,700. So you get money back, plus your car. That's a good deal, right?

No.

What this type of offer fails to account for is real world salvage value. Scrap prices fluctuate all the time and it's unlikely that you'll find a salvage agent that isn't an expert negotiator.

It's tempting to take the money and repair the car yourself, but this can often be more hassle than it's worth. While you are likely to find someone who can repair your car for less than a large insurer-approved garage, you'll be without a car for the duration of the repairs as the insurer will take back their courtesy car after you accept their settlement. Typically, there is a two to three day grace period with courtesy cars.

Scrap or Repair?

Category C settlements also fail to include the cost of returning the car to the road. After a Category C write off, you are legally obliged to get a new MOT certificate and a DVLA approved Vehicle Identity Check. The MOT costs £54.84, not including the cost of any routine repairs required to pass the test. The Vehicle Inspection Check will cost you £41. So that's a minimum of £96.84, assuming your car passes the new MOT.

But it's not just the cost that makes a Category C repairs a difficult option. Should you decide to sell your car, the write off will show on any checks that a potential new owner carries out. Although the check will state that the car is repaired and has passed inspection, ask yourself whether you'd buy the same car.

When considering a settlement in a Category C write off, factor in the additional hassle and costs for repair. Ask the insurer or their representative to break down settlement so you can judge each factor accordingly. Ask yourself whether their valuation of the car is fair, get some salvage prices and find out how much you can get the repairs done for. If, after all of this is taken into account, you can still make a good saving it may be worth considering accepting the car back from the insurer.

If not, try to negotiate a settlement that requires the insurer to dispose of the car and include the salvage price in the cash settlement.

Once you've reached a suitable settlement for the car and have the cash in your hand, it's time to respond to the earlier offers of compensation. If you elect to accept compensation, prepare an itemised list of all related expenses and forward these to the claim handler.

Sean O'Meara is editor of Watchmywallet.co.uk

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