When Does Insurance Company Total A Car – Many new car buyers believe that their insurance company is not obligated to continue making auto loan payments while they collect on their car. Unfortunately, this misconception leaves many car owners on the hook for underwater car loans after a total loss.
After a car accident, Texas law allows the victim to seek compensation from the at-fault driver and the driver’s liability insurance. Compensation puts the victim in the same position as the victim would have been if the collision had not occurred. In the case of property damage, this means compensation for necessary repairs or compensation for the fair market value of the vehicle.
When Does Insurance Company Total A Car
The market value of a car is the price the car would fetch if offered for sale by the seller and bought by a willing buyer. If the cost of repairs is close to the market value of the car, the liability provider may “total”. Totaling the car means that the insurance company chooses to cover the market value of the car instead of paying the owner to fix it.
How Car Insurance Companies Value Cars
When an insurance company totals a car, the only relevant question is the market value of the car; The loan balance is irrelevant. Unfortunately, the value of a car drops significantly in the first few years after purchase, consumers often finance the purchase of a new car, and lenders sometimes require nothing up front. These three situations cause many new car buyers to be “underwater” on their car loan right after driving off the lot.
Gap insurance (also known as a debt cancellation policy) covers the difference between what someone owes on the car and the value of the car if the insurer pays the total of the car. In Texas, a consumer can purchase insurance from an insurance company or through a dealer. Texas law does not require car buyers to carry gap insurance, and a retail car dealer cannot require gap insurance as a condition of obtaining a car loan.
Suppose someone buys a new car. A few months later, a careless driver crashes the car and the at-fault driver’s liability insurance chooses to total the car instead of paying the owner for repairs. At the time of the accident:
Under these facts, Texas law awards the vehicle owner $16,000.00 in property damages. It does not matter if the owner of the $16,000.00 does not pay the loan balance in full. What happens to the $4,000 “gap” depends on whether the owner insures the gap. If the owner had gap insurance, this would cover the difference, so the owner would have a $20,000.00 car loan payment – $16,000.00 from the liability carrier and $4,000.00 from the gap insurance – and stop future payments. If the owner of the vehicle does not have gap insurance, the owner must continue to pay the lender the balance of $4,000.00 even though the owner no longer owns the vehicle.
How Total Loss Value Is Calculated By Insurance Companies?
The bottom line is that car owners who owe more than the car’s value should buy gap insurance right away. Every day, Texas accident attorneys hear stories of car owners who choose not to buy gap insurance, get left behind on their credit, and end up paying for cars they don’t own. While it is possible to convince an insurance adjuster to significantly increase the value of a car, it is difficult, if not impossible, to help someone avoid paying too much of a gap.
If someone’s indifference hurts you or a loved one, you have enough to worry about. Avoid property damage and dealing with insurance. We work with your insurance company so you can focus on getting your life back to normal. You have one chance to do this; make the right choice by choosing the right lawyer. Call us at (956) 291-7870 or email us at [email protected] for a free consultation and case evaluation. You might think that only cars that are badly damaged in an accident are considered a total loss. This may or may not be true. If the cost of repairing the damaged vehicle exceeds its current market value, it is considered a total loss.
When you report an accident to your insurance company, they will send a repairman to inspect the damage to the car and estimate the cost of repairs. The adjuster will review the details of the accident and look for errors in your claim. For example, the adjuster may determine that certain damages are not attributable to the current accident. The insurance calculates the ratio between the cost of repairing the car and the current value of the car. Insurance companies typically rely on auto appraisal books such as Kelley Blue Book and Auto Trader to determine a vehicle’s current value.
Generally, a vehicle is considered a total loss if the cost of repairs exceeds the current value of the vehicle. Even if the repair costs are less than 30 percent of the car’s original value, it can still be considered a total loss.
What Happens When A Car Is Totaled?
You are entitled to compensation for the total loss of your vehicle as a result of the accident. (What your insurance company doesn’t want you to know.) If the amount you get from your insurance company is more than what you owe to your auto loan company, you’ll have extra money left over after paying off the balance. However, if the amount you receive from your insurance company is less than what you owe, you will be required to pay the total amount of the loan. If you have purchased an insurance policy, the insurance will pay the difference between your total loan amount and the total loss you receive from the insurance company.
Without legal advice, you may accept a settlement that is too small to adequately compensate you for your accident. When you contact our St. Louis car accident attorneys. Louis, you may not even understand your accident rights. Peer-reviewed means that the Financial Review Board has critically assessed the article for accuracy and clarity. The review board consists of a group of financial professionals whose goal is to ensure that our content is always objective and balanced.
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