What Happens if You Total a Financed Car?

Dealing with a totaled car can be a stressful and overwhelming experience, especially if you are already nursing the trauma of being involved in a car accident. This process often involves navigating complex insurance policies, understanding state laws and legal jargon, and negotiating with adjusters, among other stressful steps.

However, while we understand how overwhelming this process can be, knowing what to expect when a car is totaled can help you make informed decisions. Here is everything you need to know.

What Happens if You Total a Financed Car?

In such a situation, the insurance company will likely pay the car's value minus any deductible. But if the amount owed on the car loan or lease exceeds the payout from the insurance company, you will be responsible for paying the difference.

Guaranteed Asset Protection insurance, commonly known as GAP insurance, can cover the difference between the amount paid by the insurance company and what you owe on the loan or lease. As the name suggests, this type of insurance covers the "gap" between the value of a car and what's owed on a loan or lease and is usually included as an add-on to a standard car insurance policy.

However, if you do not have gap insurance, you will be responsible for paying the difference between the insurance payout and the debt on the car out of pocket. This can be a significant financial burden, especially for an expensive car.

What Type of Insurance Covers a Totaled Car?

Collision and comprehensive insurance are the two most common types of insurance covering a totaled car. On one hand, collision insurance covers car damage resulting from a collision with another vehicle, object, or person.

On the other hand, comprehensive insurance covers damage to a car caused by non-collision events, such as theft, vandalism, fire, or natural disasters.

What if I'm At Fault for the Accident That Led to My Car Being Totaled?

If you are at fault for the accident that totaled your car, your insurance company will cover the damage to your car, but only if you have collision coverage. However, suppose the other driver is at fault; their liability insurance will cover the damage to your car. 

What If the Other Driver Is Uninsured or Underinsured?

In that case, your own uninsured/underinsured motorist coverage may apply. However, remember that not all states require drivers to have uninsured or underinsured insurance coverage. So, you can only file a claim with your insurance company if you purchased this policy from them.

It's important to note that liability insurance only covers damage to other people's property and injuries they sustain in an accident caused by your own fault. This type of coverage will not cover damage to your own car. 

What if the Insurance Payment Is Not Enough to Pay Off My Car Totaled Loan?

In such a situation, you will still be responsible for paying the remaining balance unless you have GAP insurance.

Can I Keep a Totaled Car?

Yes, you can keep a totaled car if you so wish. But you should keep a few things in mind before making such a decision.

The insurance company will deduct the car's salvage value from the total payout you are entitled to receive. The salvage value is the amount that the insurance company can get for selling the damaged car to a salvage yard or a car auction.

You will also be responsible for repairing the car and making it roadworthy. This may not be worth it, especially if the car is heavily damaged. In fact, in some cases, taking the insurance payout and using it to purchase a new or used car may be more cost-effective.

Another thing you need to know is that it may be difficult to get insurance coverage in the future if you decide to keep a totaled car. This is because insurance companies are not confident in covering a vehicle at a high risk of causing an accident or breaking down.

Additionally, the mere fact that the car has a rebuilt title could mean settling it for less than that of a similar vehicle with a clean title.

What Is the Difference Between Salvage and Rebuilt Title?

An insurance company issues a salvage title when a vehicle is damaged to the extent that the cost of repairs exceeds a certain percentage of the vehicle's value. On the other hand, a rebuilt title is issued to a vehicle that was previously issued a salvage title but has since been repaired and restored to a roadworthy condition. To obtain a rebuilt title, the vehicle must first pass an inspection by a state-certified inspector.

What Are the Pros of Keeping a Totaled Car?

Sometimes, keeping a totaled car may not be a bad decision after all. The main benefit is that you can save money by avoiding the cost of purchasing a new or used car.

You may also want to keep the vehicle if you have an emotional attachment to it or if it has sentimental value. Keeping it may be a way to preserve its history and memories.  

Another advantage is that you can repair it and use it as a secondary or backup car. This option can be useful if you have multiple drivers in your household or if you need a spare car for emergencies.

What Are the Cons of Keeping a Totaled Car? 

Now let's go over why keeping a totaled car might not be a great idea under certain circumstances.

The first issue is that a totaled car may have significant damage to its structural components or safety systems, increasing the risk of accidents or injuries. In addition, it may be difficult or even impossible to repair these components. And even after repair, the car may not be as safe as a new or undamaged one.

You'll also need to consider the costs and whether or not it's worth it. Repairing a totaled car can be expensive, especially if it is seriously damaged. Additionally, the cost of repairs may be more than the car's salvage value, making it financially impractical to keep the car.

If you intend to sell the car in the future, consider its resale value: A totaled car may have a reduced resale value, even if it is repaired and deemed roadworthy. In addition, potential buyers may hesitate to buy a car with a rebuilt title because of the risk of breaking down in the future.

Lastly, as we mentioned, obtaining insurance coverage for a car that has been rebuilt may be difficult. 

How Can I Fight a Car Total Loss Settlement?

Insurance companies are businesses like any other. For this reason, they will likely try to lowball you when your car is totaled. So if you disagree with their valuation of your totaled car, you can dispute the settlement offer and negotiate for a higher payout.  

To do this, you will need evidence of the car's condition, mileage, and market value. This evidence may include photos of the car before and after the accident, repair estimates, maintenance records, and comparable listings of similar vehicles in your area.

If possible, hire an independent appraiser to determine the car's value. Their findings can provide additional evidence to support your claim.

It is also important to ensure you understand your insurance policy and the terms of your coverage. Look for any clauses or provisions that may support your case, such as coverage for replacing the car with a similar model or coverage for aftermarket upgrades.

Once you have gathered your evidence and reviewed your policy, you can negotiate with the insurance company. But there's usually no guarantee that the insurance company will be willing to negotiate. In that case, you'll need to move on to the next step, which is hiring an attorney to represent you. A seasoned car accident lawyer can help you navigate the legal process and fight for a fair settlement.

How Exactly Can an Attorney Help?

Your attorney will first evaluate your case to determine whether you have a valid claim. They will review the terms of your car insurance coverage, the unique circumstances of your case, and the insurance company's conduct to establish whether the insurance carrier is acting out of bad faith.

After reviewing the details of your case, the attorney will advise you on your legal options. And if your claim is valid, they will help you build a strong case against the other party.

Once they've gathered the facts (and evidence) of the case, the attorney can negotiate with the insurance company on your behalf to ensure that you receive fair compensation for your totaled car.

Suppose the negotiations with the insurance company are unsuccessful; a competent auto accident attorney can help you file a lawsuit against the insurance company. In addition, they can represent you in court to fight for a fair settlement.

Dealing with insurance companies and legal paperwork can be complicated and time-consuming. But you should not have to worry about that when you have an attorney. They can handle these tasks on your behalf, saving you time and ensuring all legal requirements are met.

In addition, car accident laws can be complex and vary from state to state. The right attorney can help you navigate these laws and protect your rights in the process.

What Damages Can I Recover in a Bad Faith Insurance Claim for a Car Accident?

If your car accident attorney establishes that your insurance company has acted in bad faith, they may help you recover damages for your losses. The damages you can recover in a bad-faith insurance claim for a car accident will depend on the specific facts and circumstances of your case.

That said, here are some examples of typical damages in a bad faith insurance claim.

You may be able to recover compensatory damages to compensate you for your losses, such as medical expenses, lost wages, property damage, and pain and suffering.

You may also be able to recover punitive damages, usually intended to punish the insurance company for its bad faith conduct and to deter it (and other insurance carriers) from engaging in similar conduct in the future.  

Lastly, you may recover attorney fees and costs you incurred in pursuing the claim.

Let Morgan & Morgan Handle Your Claim

If you are a victim of bad faith car insurance, you know how frustrating and overwhelming the experience can be. Dealing with insurance adjusters and big insurance carriers that blatantly refuse to pay your claim or intentionally undervalue your losses can leave you feeling helpless and alone. But you don't have to go through this alone. Morgan & Morgan car insurance claim attorneys can help.

As the country's largest injury firm, we help you navigate the complex legal system, negotiate with insurance companies, and fight for the compensation you deserve. Don't let the insurance company take advantage of you. You need someone who can stand up to their bullish behavior and fight for what you are entitled to.

With over $20 billion already recovered for our clients, you may be next in line for compensation. All you need is a free case evaluation with us. If you have a valid claim, we will handle the rest on your behalf, so you won't have to deal directly with insurance companies or their claims adjusters.

Fill out our free, no-obligation case evaluation form to tell us about your case. Remember, the fee is free unless we win.