Reimbursement For Your Totaled Car
If your car is totaled, the insurance company will pay a towing service to transport the vehicle to a junkyard. Next, the insurance company will request a check made payable to you for the actual cash value of your vehicle, less your deductible, but plus what it would cost you to title and register and pay auto sales tax on a new or pre-owned vehicle you purchase to replace the totaled vehicle.
Two scenarios come into play if you don’t have total replacement coverage:
Upside Down – If the actual cash value of the totaled vehicle is say $10,000 but you owe $15,000 to the finance company, you are responsible to pay the $5,000 to the finance company or lender.
GAP Insurance – If you have GAP insurance and you are upside down as far as what you owe on the vehicle, in our example above, the GAP Insurance Company will pay the extra $5,000.
You may want to consider when you purchase any vehicle, whether it’s new or pre-owned, if you feel you want GAP Insurance or total replacement coverage. Full replacement coverage would mean, the insurance company would pay out what it would cost for you to get the exact same vehicle, even if the price is higher than what you paid originally. Total replacement insurance is more expensive and even if you have this type of coverage and you’re are upside down in what you owe, you may still be responsible for paying the finance company so your loan is paid in full.
The definition of total car loss after an accident is made by your insurance company and the adjuster. If you want total protection, you can purchase total replacement value, however, the actual cash value the adjuster assigns to your totaled vehicles is usually non-negotiable.
Image Credit: Air Bag After Car Crash Wikimedia Commons