There are a lot of aspects of a car accident that are inconvenient. Even a minor fender bender can be an inconvenience since you’ll have to take the steps to repair the vehicle. One of the more inconvenient situations with a car accident is when the vehicle is totaled. This is a term used by insurance companies to determine that it’s not financially worth it to fix a vehicle. So, the insurance company will give you a set amount and take the vehicle to the scrap yard and sell it for parts to try to recoup some of the costs.
It’s always inconvenient when an insurance company determines that a vehicle is a total write-off. It’s common for people who have financed a vehicle to still owe money on that loan. A vehicle write-off does not remove the obligation to pay the loan and you’ll still need to make payments even if you can no longer use the vehicle.
Understanding a Totaled Vehicle
As mentioned earlier, sometimes the damage to a vehicle is so extensive that it’s determined that the vehicle is beyond repair. Or the insurance company determines that the cost of repairing the damaged vehicle is so much more than the original vehicle’s value. This is usually done by a percentage. Usually, your personal injury lawyer in Oakville knows that if the costs of repairs to the vehicle exceed 80 percent of the vehicle’s value, an insurance company will consider the vehicle a total loss. Sometimes certain state laws need certain types of damaged vehicles be considered total losses.
Determining Value of Totaled Vehicle
The amount that the insurance company will pay for a totaled vehicle will depend on fair market value. There are several factors are used to calculate this amount including the mileage, condition, age, model, make and add-ons to the vehicle.
The check issued by the insurance company is generally the value of the vehicle before the accident. If the vehicle is financed, the check is made in your name and lien holder. That is because the lien holder must be included on the check because the loss proceeds need to be used for paying the loan first. If there is anything left over, that money goes to you.
Sometimes the total loss amount provided by the insurance company isn’t enough to pay off the current remaining car loan. This means that when all the money from the insurance company is given to the lien holder, you still have a balance on the loan to pay. Unfortunately, you will still be responsible for paying the remaining balance on the loan, even if you can no longer use the vehicle.
One way to protect yourself from this is to get gap coverage, when you apply for your insurance. This means that your insurance company will pay for the outstanding balance on the car loan. There will be an additional cost to this when you buy your insurance.