A car is declared a total loss when the estimated repair cost is higher than the present market value of a similar car. Once the insurer decides that the car is a total loss then they take the steps detailed here.

1) The car will have been transported from the car repairers to a salvage merchant. This has been done to reduce storage costs imposed by car repair businesses for vehicles in their yards.

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

If you ask the insurers why they want these documents, they will probably tell you they want to check they have the correct model of the car, that it possessed a valid MOT and some sort of a service history to establish that is has been maintained. These are all valid reasons. However they also need to validate your claim for being fraudulent. Official documents have a number of anti-fraud measures designed by the issuing Government department. A careful check on the documents will help the person checking the claim to quickly determine that these are genuine documents and not fake. If there is doubt, they can use forensic science equipment to validate that the documents are fake or genuine. You would need to be a very clever forger to successfully forge all these documents. I would suggest that you let your insurance company have the original documents as soon as they ask for them. Just sending copies delays your claim.

3) Whilst you are awaiting your settlement details, your insurers will be setting other wheels in motion as well. They will enter your claim on the 'motor insurance anti fraud and theft register'. (MIAFTR) This is a national data base that has recorded all insurance written off vehicles and stolen vehicles since the early 1980's. It checks your vehicle against the contents of the database to see if the car has ever been the subject of an insurance total loss before, or whether it has ever been stolen and not found. It checks against your name and address; post code; your car's registration number and VIN (vehicle identification number). If any details match further questions will be asked of you, and your insurer might enter a fraud investigation.

The motor insurance anti fraud and theft register also automatically checks your vehicle against the Hire Purchase Information (HPI) database. If you borrowed money to purchase it and you still owe money, it will be on the HPI database. And your insurer will find it. So be honest and tell them about your outstanding balance. 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 automatically on all vehicle and house insurance claims. Not all insurers subscribe but the vast majority do.

Problems can arise when the outstanding balance of the loan is greater than the value of the car. In this case the insurance policy does not pay off the loan in full. I recall a scheme for motor bikes. Teenagers went into a shop, bought a new motor cycle plus all the leathers, helmets etc with money borrowed against the value of the bike. The interest on the loan was incredibly high. A short time later there would be an accident and they would total loss it (or it was stolen). The value of the motor cycle was much less than the total purchase price plus the interest. It caused a lot of upset which was blamed on the insurer and not the stupidity of the youngster for getting involved in such a bad deal with the motorcycle dealer.

4) Your insurer will be getting bids for the salvage. The more they can get, the less they will have to pay out on your claim. There has been a lot of publicity about vehicles which have been written off finding their way back on to the road, or being purchased by the criminal fraternity to aid their disguise of a stolen vehicle. The ABI (Association of British Insurers) have issued a code concerning the disposal of vehicle salvage. All insurance companies adhere to this code. The result is that the majority of salvage is sold by the insurers to reputable salvage dealers. If the vehicle is damaged to an extent that meets listed criteria, it will be stamped with a code that requires the vehicle to be scrapped or broken up. Cars with less damage could still be fixed and returned to the road.

5) Once all of the above processes have taken place your insurers will propose a settlement figure to you.

Their assessor will have consulted the trade publications to value the car, amending these figures for the age, condition and mileage of your car, and his knowledge of the local car market. The final figure that he arrives at forms the starting point of the settlement figure given to you. Any policy excess will have to be deducted along with any outstanding finance.

Your insurer should make it clear to you precisely how much you will receive and explain 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) Once you have accepted the value (some insurers might need your signature to a document called a 'form of discharge') you will receive a cheque.

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

Insurance Products on our marketplace

This article was written by Trevor Dace. He has many years of experience working as a claims adjuster with a number of UK motor insurance companies. His website http://www.instant-online-insurance.co.uk offers Tesco online car insurance with online quotes and secure online payment.