Cash Settlements for Motor Vehicle Claims

What is a cash settlement?

A cash settlement is when your insurer pays you a lump sum of money instead of:

• Arranging repairs through one of their authorised repairers, or
• Replacing your vehicle after a total loss

When are cash settlements offered?

Cash settlements are typically offered when:

• The vehicle is uneconomical to repair (a total loss or write-off)
• Repairs are delayed or not possible
• Their suppliers refuse to provide a warranty on repairs
• There are supply or trade shortages
• You’ve challenged the proposed repair method or scope
• The relationship between you and the insurer or repairer has broken down
• The offer is a ‘without prejudice’ settlement offer, meaning it is not an admission of liability, just an attempt to resolve the claim.

Can I ask for a cash settlement instead of repairs?

Yes, you can request a cash settlement instead of insurer-managed repairs, but your insurer doesn’t have to match your preferred repairer’s quote.

If the insurer is willing and able to repair the vehicle using their preferred suppliers, they’re entitled to cash settle the claim based on the price they would have paid their own repairer. If your repairer is more expensive, you may need to pay the difference (unless you can demonstrate that the insurer’s repair quote is not actionable). 

What happens if my vehicle is a total loss?

If your vehicle is declared a total loss (write-off), the insurer will usually: 

• Pay you the market value (based on the vehicle’s pre-accident condition, kilometres, age, and features,) or an agreed value, depending on the option you chose for the relevant period of insurance
• Deduct your excess, and in some cases, registration, stamp duty, and salvage value (if you retain the vehicle)
• Cancel the policy once the payout is made

What if the insurer is offering repairs but I want a total loss cash settlement?

Insurers will generally only declare a vehicle a total loss (write-off) if it meets the threshold set out in your policy or state legislation. If the repair cost is less than the insured value, and the vehicle is deemed repairable and roadworthy, the insurer is generally entitled to proceed with repairs, even if you would prefer a cash payout or replacement. 

However, if you believe the vehicle should be written off, you can challenge the insurer’s position. Insurers are required to act reasonably and in good faith under the Insurance Contracts Act. If it’s clear that repairs won’t restore the vehicle to a safe or acceptable condition, you could ask for the decision to be reviewed. 

What are the risks of accepting a cash settlement?

Accepting a cash settlement for a motor vehicle insurance claim could give you flexibility, but it also means taking on more responsibility. Some of the risks include: 

• You lose access to the insurer’s authorised repairer network and their workmanship guarantee
• If additional damage is uncovered later, you may not be able to claim more
• If repair costs increase, you may need to cover the difference
• If the insurer’s valuation or repair estimate was too low, you may be under-compensated

What if I accepted an inadequate offer?

If you accepted a settlement and later discover it was too low, you could return to the insurer and ask for a reassessment, particularly if:

• You find additional damage
• You discover unfair or incorrect deductions

However, if you signed a Deed of Release, this may limit your right to request further payment. A Deed is a binding legal document that usually prevents further claims relating to the same event.