Does an Insurance Company Have to Pay the Balance Owed on a Car Loan When a Vehicle Is Totaled?
An policy company will total a vehicle if the price to repair it is more than what it is worth or if it will remain dangerous even after it is repaired. unfortunately, an insurance caller totaling a vehicle is not required to pay the car loanword balance in a settlement. The policy company is only obligated to pay the Actual Cash Value ( ACV ) of the vehicle—the sum you will need to purchase a comparable use vehicle. The policy party may use a software course of study to calculate your fomite ’ second ACV or Internet sites, such as Kelly Blue Book and National Automobile Dealers Association Used Car Guide ( NADA ). This sum can be far less than what you owe on your fomite loan .
What Should You Do If You Still Owe on Your Car Loan After Your Car Is Totaled?
If you owe more than your vehicle is deserving, you should take certain steps to protect yourself. These steps include the following :
- Be certain the ACV is correct. It is even more crucial that you receive the true ACV when you will still owe a loan on your vehicle, so you need to check the insurance company’s valuation. In many cases, the insurance adjuster may be offering less than what you are owed. You can get an estimate of the ACV by going to Internet sites such as Kelly Blue Book and finding out the retail price—the amount you would receive in a private sale—and the dealer trade-in amount. Be certain you have your vehicle’s make, model, trim, mileage, and any optional features so that you obtain an accurate figure. You will add the retail and trade-in amounts and divide the total by two to determine the ACV. It is a good idea to repeat this process on more than one website. Doing this could increase your settlement by thousands of dollars—which would be used to reduce the loan balance you owe.
- File a gap insurance claim. If you purchased gap insurance when you obtained your car loan, you can contact the insurance company directly or have your lender to make a claim. Gap insurance may pay the difference between the ACV and what is owed on your auto loan so that you do not owe a balance.
- Pay your car loan payments. Until your insurance claim is settled, you should continue making your automobile loan payments on a timely basis to not default on your loan. If you did not purchase gap insurance and your vehicle is totaled, you will owe any balance of your car loan above the ACV payment. You are legally responsible for paying the full balance owed to the lender—even though you no longer have your car and may need to finance the purchase of a new one. You will need to contact the lender to make payment arrangements.
If you will not have a big down payment to pay on the vehicle you purchase to replace your totaled one, you may want to consider purchasing gap policy to protect yourself in case this new fomite is totaled in the future.
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