
What to Do When The Insurance Company Totals Your Car
Being left with a totaled car after a motor vehicle accident is a horrible experience. Let’s just make that clear right away. Let alone the fact that you have to deal with an auto insurance company. Often your car will be “totaled.” Generally, a vehicle is “totaled” when the cost of repairs surpasses 80% or more of the value of the vehicle. The challenges occur when it comes time to figure out the true value of the vehicle. But what happens when your car is totaled, and you owe more on your car loan than the car is worth? This is usually referred to as being upside down on your car loan. It’s a common problem in the United States. According to Experian Automotive, around 86% of consumers who buy new cars finance their vehicles and the average new car loan is about $25,000 for about 5-6 years. This means Americans are financing millions of dollars for cars. One natural cause of this is that a lot of drivers end up being upside down on their car loans after having their car totaled out after a car accident. As aresult, many consumers who get in an auto accident are often faced with paying money owed on newly obtained cars long after their vehicles were declared a total loss.
For instance, let’s say you purchase a car for $40,000. You put $5,000 down and you finance $35,000 through a bank or the auto dealership’s finance company. Three months later you are involved in an accident and your car is totaled. You file a claim with your auto insurance company, and they determine that the actual cash value(ACV) of your vehicle is $25,000. What do you think happens next? This is situation that is referred to as being upside-down on a car loan. Your auto insurance company will send you a check that is addressed to your finance company for the ACV of your vehicle and you will owe the remaining balance on your car loan. A lot of my clients think this unfair, but you still have to pay off your loan. Unfortunately, there is not a lot an attorney can do for you in this situation.
However, there is one way that you can protect your investment and avoid the windfall of being upside down on a car loan. You can obtain Guaranteed Asset Protection or GAP insurance as it is commonly referred. Gap insurance is not required by Florida law, but some drivers are required to pay for gap insurance as a condition on their lease or auto loan. If you loaned or leased a fairly new vehicle, gap insurance can be valuable because you may owe more money on the car than the car is currently worth, as measured by the vehicle’s actual cash value. As your car gets older, its value drops pretty rapidly, and most insurance policies only cover a vehicle’s current value. Once you have gap insurance, make sure to occasionally keep track of your vehicle’s variation in value overtime and compare that to the amount you owe on your loan. As soon as you’re no longer “upside down” (you owe less than your car is worth) you can go ahead and remove gap insurance coverage from your vehicle.
Basically, If your vehicle is totaled after an accident, GAP insurance will take care of the balance owed on your vehicle. So, in the situation above, your GAP insurance would have covered the difference between the amount you still owed on your car loan minus the amount that your insurance pays out for your totaled car. You can buy GAP insurance when you initially buy your car, or you can purchase it afterwards from your auto insurance company. I definitely recommend GAP insurance. Oftentimes, I have clients who are involved in car accidents and owe much more on their car than their car is worth. If they have GAP insurance, they can easily take care of that issue and have their GAP insurer cut a check for the difference between what she owed and the ACV of her vehicle. How do you pay the balance owed if you do not have GAP insurance? Generally speaking, my clients in this situation have been able to continue to make their monthly payments until the balance is paidoff. You may also be able to contact your finance company and figure out a payment plan. Of course, I know that if you just had your vehicle totaled and lost your investment including your down payment, this is not much help after the fact. If you are not satisfied with your total loss car insurance settlement, you do have the option of disputing your insurance company’s valuation of your car. You can try to get your own appraisal from an online resource like Kelley Blue Book. That probably won’t work and as such, you will likely have to hire an appraiser to provide a new appraisal to give to the insurance company. If that doesn’t work, you may demand arbitration from your auto insurance company.
Speak With a Miami Car Accident Attorney Today
If your car has lost value due to the negligence of another driver, you should consider talking to a car accident lawyer to learn what your rights and obligations are under the law. Let the personal injury attorneys at Suarez & Montero review the circumstances of your case and discuss your legal options. Our attorneys are ready to provide proven legal representation in pursuing your claim and stand ready to protect your rights. Our attorneys routinely leverage their considerable experience into obtaining significant settlements from insurance companies who are known for being reluctant to pay out on claims. Additionally, our firm genuinely cares about our clients. When you come to us for assistance with any legal matter, we provide the utmost personal attention to make sure that we achieve the best possible outcome.