2 May, 2022
After the shock of a car accident wears off, the last thing you want to hear is more distressing news. But it’s not uncommon for your day to go from bad to worse after your insurance company calls to tell you that your car is a “total loss.” In a frustrating turn of events, not only do you have to deal with losing your everyday vehicle, but you also remember that your car was financed with a loan to which you still owe a balance. Now what?
Do you still have to make loan payments on a car that no longer exists to you? If the accident was a result of another driver’s negligence, will their insurance company pay off your loan? Well, it’s complicated. We’ve outlined everything you need to know.
If a car is totaled in an accident that was another driver’s fault, it’s often assumed that their insurance company is obliged to pay for the remainder of the loan payments. Not so simple. The insurance company will only reimburse you for the current value of the car, not necessarily the amount you’ve been paying in loans. As you may know, cars tend to depreciate over time as mileage builds up and the state of the car worsens.
In the best-case scenario, the total loss check you receive from the insurance company will be for a greater amount than the sum you still owe on the car loan. In the rare case that your vehicle increased in value over time, you’ll be able to pocket a few hundred dollars that you can use toward purchasing a new car. More likely, the amount of money you currently pay in loans will be greater than the current value of the car, and thus, the amount the insurance company will give you. In this case, you’re legally required to continue to pay off the remainder of the loan out-of-pocket, even though the car doesn’t exist to you anymore.
Every insurance company has its own rules for determining when a car is considered a total loss. In most scenarios, a totaled vehicle is one for which the cost of repair exceeds a certain percentage of the car’s value. That standard is usually 80 percent. In this case, for example, if your car is currently valued at $10,000 and sustains damages upwards of $8,000, it would be considered totaled. The insurance company, in this scenario, would pay you the full $10,000.
Remember, $10,000 represents the current value of the car as determined by the insurance company, not necessarily the value at which you initially bought the car. In the insurance world, this is referred to as the vehicle’s actual cash value (ACV). The company will use software programs and other applications like Kelly Blue Book and the National Automobile Dealers Association Used Car Guide to calculate the ACV.
If the insurance company determines that you owe more than the vehicle is worth, it’s important that you take the necessary measures to protect yourself. With the help of a trusted attorney, this can include:
If your car was totaled in an accident as a result of another driver’s negligence, be aware that the at-fault party’s insurance company will fight to settle for as little as possible, which could leave you struggling to pay off car loans and other damages. At The Barnes Firm, we’re here to assist you. Our trusted legal team will help you battle the insurance company so that you can get the compensation you deserve. Having a professional attorney representing your interests will ensure that you obtain a fair settlement.
With more than 100 years of combined legal experience, our team of knowledgeable lawyers can handle a case of any size and are available 24/7 to review your accident and answer your questions. To schedule a free consultation with our experienced auto accident attorneys, call The Barnes Firm or fill out our online contact form today.
The Barnes Firm (800) 800-0000
“As President of The Barnes Firm, I have dedicated my career to achieving justice in hundreds of cases for the victims of injuries caused through the fault of others. Additionally, I have been honored to have been elected by my peers to serve as president of the WNY Trial Lawyers Association.”
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