What If Insurance Totals My Car but I Still Owe Money?
Being involved in a car accident is stressful enough, but it can be even more overwhelming if your insurance company declares your vehicle a total loss while you still owe money on it. Many people are surprised to learn that even after receiving a payout from the insurance company, they may still owe a balance on their car loan. This situation is common and can leave accident victims feeling frustrated and uncertain about their options.
Why This Happens
When your insurance company declares a vehicle a total loss, they generally pay you the actual cash value (ACV) of the car at the time of the accident. The ACV reflects the market value of your vehicle after depreciation, not the amount you originally paid or the balance remaining on your loan.
For example:
If you owe $15,000 on your car loan but your vehicle’s ACV is only $12,000, you would still owe $3,000 even after your insurance payout.
This difference is often referred to as being “underwater” or having negative equity on your car loan.
This situation can happen to anyone, especially with newer cars that depreciate quickly, high-mileage vehicles, or loans with long repayment terms.
GAP Insurance and How It Helps
GAP (Guaranteed Asset Protection) insurance is designed to cover the difference between your loan balance and the insurance payout if your car is totaled.
If you have GAP insurance, the company may pay the remaining loan balance that your standard auto insurance does not cover.
Without GAP insurance, you are responsible for paying off the remainder of your loan out of pocket.
It’s important to check your policy and speak with your insurance provider to understand if GAP coverage is available and how it applies in your situation.
How an Attorney Can Help
Even if you have insurance, an attorney can provide valuable assistance when your car is totaled and you still owe money:
Ensuring Fair Vehicle Valuation
Insurance companies sometimes undervalue totaled vehicles. An attorney can help negotiate a higher payout based on the fair market value of your car.Reviewing Your Loan and GAP Coverage
A lawyer can review your loan terms and GAP insurance policy to make sure your rights are protected and you are not left paying more than necessary.Handling Disputes with Insurance Companies
If the insurance company refuses to provide a full payout or undervalues your car, an attorney can advocate on your behalf to maximize compensation.Providing Peace of Mind
Navigating a totaled car claim while still owing money can be stressful. Legal guidance ensures you fully understand your options and avoid unnecessary financial burden.
