What Happens if Your Car is Totaled and You Still Owe on the Loan?
There are a lot of frustrating things associated with being involved in a car accident, but one of the most unfortunate circumstances is if you still owe more on the loan balance for the vehicle than your insurance company is willing to pay out for the value of the car.
So how can you protect yourself from this type of situation? Here’s some information to consider.
Get an accurate valuation of your vehicle
The insurance company will pay you the fair market value of your vehicle after it’s totaled. This is the amount of money your vehicle was worth before the accident occurred, factoring in issues such as depreciation and mileage. The cost to repair the car is not necessarily the same as its fair market value, and in circumstances where the repair cost are greater than the value, the insurance company considers the vehicle a total loss, or “totaled.” You are then entitled to a check for the fair market value of the vehicle.
Many people don’t realize they can actually negotiate this amount with their insurance companies. You can do your own research on the fair market value and repair costs, and make a counter offer you consider reasonable. This is especially important if the loan balance will be greater than the check you’re going to get from your insurance company.
Gap insurance can also help you protect against this type of circumstance. If you don’t put down at least 20 percent of the purchase price when you buy the vehicle, gap insurance can help protect you in this exact circumstance, covering that difference (or “gap”) that would occur between the payout and the loan balance.
For more information about negotiating with an insurance provider after you’ve totaled your vehicle, contact an experienced auto accident lawyer at Jakubowski, Robertson, Maffei, Goldsmith & Tartaglia LLP.