Owing money to a finance company when your car is totaled can be a problem because, unfortunately, it is possible to owe more on your car, truck, or SUV than its ACV amount.
This is referred to as being upside-down on your car loan and is exactly when you need to have GAP insurance coverage. GAP insurance will ensure this amount doesn't come out of your pocket. It's important to note that GAP coverage will only cover this gap for auto loans.
If you've purchased your vehicle using a home equity loan, GAP insurance will not pay for the difference in what you owe versus what your vehicle is worth. Gap coverage also won't pay for:. Another type of additional coverage that will come in handy when your car is totaled is new car replacement coverage. You'll find that this type of coverage means you can replace your car with one of an equivalent make and model. Usually, this type of additional coverage is only available on vehicles that meet certain requirements, but when combined with GAP insurance, it can ensure you are taken care of if your car is totaled.
Having both of these coverages will also help to combat any issues with depreciation that you may encounter. Being in an accident where the cost to repair damages to your vehicle outweighs its ACV means your insurance company will likely consider it to be a total loss. If this happens, you need to understand what your options are and how the insurance company will proceed. Having some additional coverage is a good idea if you have a loan on your car to ensure the loss doesn't leave you financially strained.
New Cars. Buyer's Guide. Type keyword s to search. Today's Top Stories. Future Cars Worth Waiting For: — If your car is damaged beyond repair as a result of a falling object, for example, and you have comprehensive coverage insurance, your insurer will likely pay you the cash value of your vehicle minus the deductible.
The short answer: yes. Usually, the insurance company will take ownership of your vehicle by transferring the title to their name. If you decide to keep your car, the salvage value will be deducted from your settlement total. Some states have specific guidelines relating to owner-retained total losses, so be sure to check with your claims adjuster to fully understand what this entails. But you should be aware that you may have to pay out of pocket to cover the cost.
Are you responsible for paying the balance? This reimbursement is then usually used to pay off the loan. Keep in mind, there is such a thing as still owing money to your lender after you receive payment from the insurance company.
Another important detail about this coverage is that the loan must be a vehicle loan and be taken out only to purchase the vehicle. So, if you use a home equity loan to purchase a vehicle, this coverage would not be available.
Connect with your American Family Insurance agent to find out just the right auto insurance coverages to protect you from the unexpected. If the cost of repairs is less than the value of your car, your vehicle will likely not be declared a total loss. Have more questions about car insurance coverages or a totaled vehicle?
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Register new account Pay your bill. Get your ID cards. Updated: May A car is generally considered totaled when the cost to repair the car exceeds the value of the car. In other cases, the insurer determines whether a vehicle is considered a total loss. Quality Auto Coverage Starts Here. Get a quote Find an agent. If you're involved in a car accident, there are a few basic steps to follow before and after your vehicle is considered totaled: Contact your agent and initiate an insurance claim.
Your insurer will determine whether the vehicle is a total loss, based on repair costs. Your insurer will issue payment for the actual cash value of the totaled vehicle, minus your deductible on your comprehensive or collision coverage. Rental Reimbursement Coverage. This content is for informational purposes only and may not be applicable to all situations.
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