Totaled My Financed Car

It’s a gut-wrenching experience: totaling your financed car. That sinking feeling when you realize your mode of transportation, and potentially your financial stability, has been severely impacted. Here’s a breakdown of what happens next and the steps you should take.

Immediate Actions:

1. Safety First: If you’re able, ensure the safety of yourself and any passengers. Call emergency services immediately if needed.
2. Report the Accident: Call the police to file an official accident report. This report is crucial for insurance claims.
3. Contact Your Insurance Company: Notify your insurance provider as soon as possible. They will guide you through the claims process and assign an adjuster to your case.
4. Gather Information: Exchange information with the other driver involved (if applicable), including insurance details and contact information. Document the scene with photos if you can do so safely.

The Insurance Process:

The insurance adjuster will investigate the accident to determine fault. They will also assess the damage to your car. If the cost to repair the vehicle exceeds a certain percentage of its actual cash value (ACV), the insurance company will declare it a total loss.

The ACV is the fair market value of your car right before the accident, taking into account its age, mileage, condition, and other factors. The insurance company will research comparable vehicles in your area to determine this value.

The Gap in Coverage:

Here’s where the finance aspect complicates things. You owe the lender the outstanding loan balance on your car. If the ACV offered by the insurance company is less than your loan balance, you’re “upside down” on the loan, also known as being “underwater.” This means you owe more than the car is worth.

This is where Gap Insurance becomes crucial. If you purchased Gap Insurance (Guaranteed Asset Protection) when you financed the car, it covers the difference between the ACV and your loan balance (up to a certain limit outlined in your policy). Without Gap Insurance, you’re responsible for paying the remaining balance out of pocket.

Negotiating with the Insurance Company:

It’s often possible to negotiate the ACV with the insurance company. Research the market value of comparable vehicles in your area and provide evidence to support your claim. Documented maintenance records can also strengthen your argument. After the Settlement:

Once you reach a settlement with the insurance company, they will typically pay the lender directly to satisfy the loan. If you had Gap Insurance, it will then pay the lender any remaining balance (within the policy’s limits). If you don’t have Gap Insurance, you’ll need to arrange to pay the remaining balance to the lender.

Moving Forward:

Totaling a financed car is a stressful experience, but understanding the process and acting promptly can help you navigate the situation. Consider future transportation options carefully and think about adding Gap Insurance to your next auto loan to protect yourself from potential financial loss.