How insurers decide your car is a write-off
An insurer "writes off" your car when repairing it would cost more than it's worth (an economic total loss), or when the damage meets the statutory criteria (severe structural, fire, full flooding, or stripped). If it's repairable it can be fixed and re-registered (state rules apply); if it's statutory it's parts-only forever. When they total it, they normally pay you the car's agreed or market value (minus your excess and any finance owing) and take the wreck - which they then sell at salvage auction. That's how it ends up at Pickles, IAAI, Grays or Slattery.
General guidance for Australia. Thresholds, settlement options and repairer rules vary by insurer, policy and state - always check your Product Disclosure Statement (PDS) and ask your insurer.
How the decision is made
After you claim, the insurer's assessor estimates the repair cost. If that cost is too high relative to the car's value - roughly, when fixing it isn't economical - the car is declared a total loss. The exact cost-to-value point isn't fixed; it varies by insurer and also factors in what the salvage is worth. Cheaper, older cars hit that point on relatively minor damage, which is why a small prang can total a high-kilometre car.
Repairable vs statutory
A total loss is recorded on the Written-Off Vehicles Register as either a repairable write-off (can be repaired and, subject to your state's inspection rules, re-registered) or a statutory write-off (the most severe category - parts, dismantling or export only, never road-registrable again).
What you get paid: agreed vs market value
- Agreed value - a fixed sum set when you took out the policy. You know the number up front.
- Market value - what the insurer assesses the car was worth just before the loss. It can be less than you expect.
- From that, the insurer deducts your excess, and pays out any finance owing to your financier first.
Your options when it's a total loss
- Standard payout - the insurer pays you the value and keeps the wreck (the salvage). This is the default.
- Cash settlement, keep the car ("retain salvage") - where your insurer allows it, you take a reduced payout (the value minus the salvage they'd have recovered) and keep the car to repair yourself or part out. If it's repairable you can pursue re-registration under your state's rules; if it's statutory you can't put it back on the road. Not every insurer or policy offers this - ask before you assume.
If it's repairable (not written off): who fixes it?
When the damage is economical to repair, the insurer pays for the repair rather than totalling the car - and there's usually a choice in who does it. Many policies steer you to the insurer's preferred (partner) repairer network; some policies, and some states, give you a choice of your own repairer. Whether you get that choice depends on your policy and where you live, so check your PDS.
How it reaches the auction (and you)
Once the insurer has paid you and taken the wreck, it recovers some of that money by selling the salvage through salvage auction houses. That's the supply chain behind every repairable and statutory write-off you'll see listed - one person's total loss is the next person's project or parts donor.