Totaled cars present unique issues and depending on the coverage options you have, a totaled car claim can be lengthy
Every state requires motorists to carry some proof of financial responsibility to show they can cover the cost to repair any damage caused by a car accident that is their fault. The states’ minimum required coverage might not be enough, especially if your car is totaled as a result of an accident. A totaled car presents some unique considerations where your car insurance coverage is concerned.
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Insurance professionals define a totaled car as one that has sustained so much damage that the cost of repairing it is more than the vehicle's worth. If a car is worth $5,000 and the estimated repair cost after an accident is $5,500, the insurance company will likely declare the vehicle a total loss. An insurance company may also declare it a totaled car if it is not possible to repair the vehicle so that it operates safely.
If your car is declared a total loss, the insurance company will pay you the cash value of the vehicle. Insurance professionals determine the cash value of a vehicle by taking the market value and subtracting the value of any existing damage or excessive wear and tear. For example, if your vehicle had several dents or scratches, this damage will reduce the amount of money you are paid.
Some insurance companies offer auto replacement insurance policies. These policies typically apply to cars that are less than one year old. Instead of paying the current cash value of the car, the insurance company will give you enough money to purchase a new car to replace your totaled car. Your auto insurance company may have additional restrictions on this type of policy. For example, some companies will only pay for a car replacement if your totaled car had less than 15,000 miles on it.
(You can find out more information about filing a claim for your totaled car here.)
Another option to consider is GAP coverage. If you total a new car within a few years of buying it, the cash value of the car may be less than what you owe on the loan, especially if you made a small down payment or no down payment. If you owe $12,000 and the cash value of the car is only $9,000, you will have to come up with an additional $3,000 to pay off the loan. GAP insurance, also known as guaranteed auto protection, is a type of insurance that ensures you will receive enough money to pay off a loan or the balance of a lease. Leasing companies typically require GAP coverage, and this type of policy is available if you purchase a vehicle with money borrowed from a bank or financing company.
Having a totaled car as a result of an accident is a traumatic enough experience without facing the possible shortfall of replacing a valuable asset. Consulting with an experienced insurance professional can ensure you get the proper coverage for your circumstances, Reply! can help by connecting you with local insurance professionals who have that experience.