Like most people, you can’t afford to buy a new car outright. Instead, you get a loan from a lender and buy a car. It generally takes you a few years to repay the loan. However, you can still total that car while paying back the loan. You’re going to find out what your options are in that instance.
• Your car is considered a total loss when it would cost the insurance company more to fix the car than what it’s worth.
• Insurance companies generally pay Fair Market Value (FMV) for a totaled car.
• The actual value of your car may be more or less than the unpaid amount on your car loan at the time of your accident.
• The loan company will stipulate that the insurance payments you receive be applied to the outstanding amount of your loan.
• You’re responsible for repaying the entire loan amount if there’s any amount left after you’ve applied insurance payments.
• Gap insurance can cover the outstanding amount of the loan after you have applied insurance payments.
What is a Totaled Car?
A car is totaled when the insurance company determines that it’s a total loss. Many states set a threshold when the insurance company has to declare the car as being totaled. Note that the threshold varies by state. For example, the threshold may be 75% in some states, 50% in others, and 100% in yet others.
Some states don’t have a threshold amount. In this case, the insurance companies must tally the cost of repairing the car against the cost of salvaging it. Personal injury lawyer in Aurora knows that they will declare the car to be totaled if the repair cost exceeds the salvage.
If you were to crash your car into a fence and don’t sustain any injuries, but your car is badly damaged, your car may be declared totaled by your insurance company. Let’s say that your mechanic estimates the repair to be $8,500. Your insurance company states that the car’s actual value is $10,000.
Assume that the threshold for total loss happens to be 75%. Your insurance company will declare your car to be totaled since the cost of repairing the car against the actual value is 85%. Suppose you negotiate with your mechanic to repair your car for $5,000. In this instance, the insurance company will reimburse you since you’ll still use the car.
Can You Keep a Car if it’s Totaled?
Yes, if you love your car or think you can easily fix it, you can keep it, even if the insurance company defines it as totaled. Remember that the insurance company will deduct the car’s salvage value from your settlement. Your car will still be considered to be officially totaled. You may have trouble registering and/or selling it in the future.
Does Your Totaled Car Need Insurance?
No, because it’s officially not considered to be drivable, even if you can drive it. You’ll need to obtain a rebuilt title from the DMV in your state if you want to continue to drive it. You’ll also need to get it insured. Expect to be pulled over by the police because you don’t do these things.