A car crash can be a major inconvenience for anyone. This is especially true if your vehicle turns out to be a total loss. If you financed your car, and you still owe money on the loan, you might be wondering what comes next. Do you still have to pay your loan? The short answer is yes. But is there any way to protect yourself against this situation?
What Exactly Is a “Totaled” Vehicle?
After a serious crash, your vehicle could suffer from extensive damage. Sometimes the damage is simply beyond repair, and the car insurance company deems it a “total loss.” Sometimes, a car could be deemed a total loss if the cost of repairing exceeds the vehicle’s value by a certain amount. Usually, if the repairs cost 80% or more of the car’s value, it is considered a total loss.
The value of a totaled vehicle is determined by using what is called the “actual cash value,” or fair market value. There are a few factors that go ingot calculating the fair market value. This could be the make, age, model, condition, and so on. Typically, when your car is totaled, the insurance company will issue a check for the current value of your car before it was damaged. If you financed your car, the check will be made out to both you and the lien holder. This is because the total loss proceeds must first go to paying towards the loan. Whatever is left would go to you.
Do I Have to Pay off My Loan?
Often, the total loss proceeds are not nearly enough to pay off the remainder of the car loan. After the lienholder is paid, you may still owe them money. So, do you have to pay this money back? After all, you no longer have the vehicle. Unfortunately, you do have to pay off your loan. Even though you no longer can use the car, you are still responsible for paying off any remaining balance.
However, you can avoid having to pay out of pocket for the remainder of your car loan. Commonly referred to as “gap coverage,” Guaranteed Asset Protection can help bridge the gap between the amount you owe, and the totaled car’s fair market value. If your insurance policy includes gap coverage, that coverage will kick in and pay for the outstanding balance on the car loan. That way, you won’t have to pay anything out-of-pocket, assuming your gap coverage limits are high enough.
In a Serious Car Crash? Contact The Law Giant for Help
Any car crash can leave you feeling overwhelmed and unsure of what to do next. After receiving medical attention, contact Begum Law Group Injury Lawyers right away. We can handle the legalities of your case while you focus on recovering. With our skilled legal representation by your side, you may be able to secure full and fair compensation for your damages. Contact us at (866) 523-4167 to schedule a free case evaluation.