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What if My Car is Totaled and I Owe Money on My Loan?

What if My Car is Totaled and I Owe Money on My Loan?

It can be a real headache to be injured in a car accident, only to have your car “totaled.” Suddenly, you’re without a vehicle to get to work and do whatever else you have to do, like take your children to school, go to doctors’ appointments, go to the vet, buy groceries, and run your everyday errands.

Generally, the insurance company will decide if a car is totaled in a car accident. Since each insurance company has its own criteria for determining when a car is totaled, we’ll spare you the details. Nevertheless, if your car is totaled in an accident, and you still owe money on the auto loan, you’ll want to know, “What happens if I still owe money to the lender and my car was deemed a total loss?”

Will the Insurance Check Be Enough?

Let’s say the insurance company decided that your car was totaled, or in other words, a “total loss.” Will the insurance check be the same as what you owe on the auto loan? Not necessarily. The current market value of your vehicle is what determines how much the insurance company pays you, not how much you owe on the auto loan. To determine the value of your vehicle, you can check out Kelly Blue Book’s website.

If you’re lucky, the insurance company will cut you a check that is more than what you owe on the totaled vehicle. You’ll be able to pocket a little cash and use it as a down payment on a new vehicle. But what if the insurance check is less than the balance on your auto loan?

Unfortunately, you are legally liable for the auto loan, and if the insurance check was less than what you owe, you still have to continue paying your monthly payments, even if your vehicle was totaled and you cannot drive it.

Is there a solution? Our advice is to get gap insurance (an optional form of coverage) – you can ask your insurance agent about it. With gap coverage, if your car is totaled in an accident, the gap insurance pays the difference between what you owe on your vehicle and the car’s actual cash value (ACV) at the time of the accident. It’s definitely worth getting.

Next: Is Uninsured Motorist Coverage Required in South Carolina?

Looking for a Columbia car accident lawyer? Contact the Law Office of James R. Snell, Jr., LLC to schedule a free case evaluation.


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