It’s every driver’s worst nightmare: You’ve been in an accident. You’ve taken the necessary steps to make sure everyone involved is okay, but have you checked on your vehicle yet? It has been labeled as a total write-off or ‘total loss,’ but what does this term actually mean? Can you keep this vehicle, even though repairing it will outweigh the costs of writing it off? This is where an Owner-Retained Salvage Agreement comes into play. Let’s review the total loss vehicles, determine whether they’re worth keeping, and then outline the process if you decide to take that route.
Is Your Car Salvageable After a Total Loss Declaration?
The idea of your vehicle being a total write-off is frightening, though if it’s imperative to you, don’t lose hope, according to Jesica Ryzynski, a Mitch Insurance Claims Specialist. In a recent interview with Canadian Underwriter, Ryzynski explains that there are some scenarios where owners can keep their car if it’s considered a total-loss vehicle.
Owners may be able to keep their vehicle through an option known as an owner-retained salvage agreement. This involves the policyholder keeping their vehicle while accepting a settlement based on the current market value. Another option is also available, Ryzynski explains. Known as a total loss agreement, this is when the insurer retains the salvage and pays the policyholder the fair market value of their vehicle at the time of loss.
What Happens to a Vehicle Write-Off?
Ryzynski explains that in most total-loss situations, the insurer retains control of the total-loss vehicle and usually partners with a salvage yard. From there, the yard will purchase the salvage and decide what will happen to the car.
“This helps offset the cost of claims and avoids what would otherwise be a disposal fee,” Ryzynski told the Canadian Underwriter.
On the other hand, what if a vehicle is in an accident and deemed a total-loss vehicle by an insurance company? In such cases, an owner-retained salvage agreement can enable the client to retain the total-loss vehicle. The insurance company will first deduct the salvage value from the final payout.
For example, if the insurer had given you a $10,000 payout but estimated it would have received $2,000 for selling the car as salvage, then you would be offered $8,000. From there, you would accept the reduced payment and retain full possession of the vehicle.
When Should I Opt for an Owner-Retained Salvage Agreement?
According to Ryzynski, the cost to repair an older vehicle may sometimes exceed its value, making it unwise for the insurance company to undertake the repair. “However, that vehicle could have low mileage, be really well-maintained and fully paid for,” she explains.
“The owner-retained salvage option may not be for everyone,” Ryzynski exclaims. She believes that people who are facing the loss of a well-maintained vehicle are generally interested in the option. She states that when clients learn their vehicle is a total loss, they may express fear regarding a new car payment. This can cause anxiety as it may not be something people can afford at the time. However, if these people can retain their vehicle, they can use the settlement to cover the cost of repairs. This could end up being a lifesaver for them financially.
When Should You Avoid an Owner-Retained Salvage Agreement?
There are cases when an owner-retained salvage agreement should be avoided. For example, if a car is deemed a total-loss vehicle, it might be “branded.” This means the damage is so severe that the Ministry of Transportation adds a label to the car. This label identifies the level of damage it has sustained. Each province has its own standards of designation. If a vehicle is branded, policyholders can have difficulty insuring it again. In many cases, you will need to undergo a rigorous process to make the car drivable.
It is essential to ensure that no brands are placed on the vehicle before a salvage agreement is executed. It is also highly recommended that any necessary parts can be easily found. Sometimes, the parts needed to repair are no longer available. Alternatively, they may only be available in other countries. This is particularly true for older vehicles. To add to this, it can sometimes be challenging to find a mechanic equipped to do the work.
Conclusion
In conclusion, an owner-retained salvage agreement can save you a significant amount of expenses. Additionally, it can avoid the hassle of searching for a replacement vehicle. On the other hand, there are risks associated with this approach. These risks can sometimes result in significantly higher costs than expected. Please remember to always consult with an insurance broker, like isure, or an insurer directly to get the proper assistance. If you’re in the market for new insurance for your vehicle or looking to make a claim, contact us or request a quote today!
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