How Your Car Insurance Handles Your Totaled Car
When a car is involved in a collision and incurs so much damage that it would cost more to fix the car than what the car is worth, the insurance company will typically consider the car totaled. If you are in a situation where you now have a totaled car due to an accident you caused, here is what you should expect from your car insurance company.
They may not pay the claim
The first thing to know is that if you total your own car through an accident you were responsible for, there is a chance your insurance company will not pay the claim if you file one. Insurance companies do not have to pay these types of claims if the driver did not have collision coverage at the time of the accident. Therefore, you should know that whether or not the insurance company pays the claim is up to the types of insurance coverages you had at the time the accident took place.
They will pay for the current market value of the car
If you do have collision coverage, you will be safe in this incident as the insurance company would pay the claim. When they begin calculating how much to pay you, they will look up the value of the car just as it was right before the accident occurred. This value represents the current market value of the vehicle, and this is the amount they will pay you for the claim. If, for example, your car was worth $11,500 when the accident happened, that is the amount of money you will receive from the claim.
Your gap coverage would pay for the deficit
One last thing to understand is that you might still owe money on the car after the insurance company pays the claim. If, for example, you owed $13,000 on the car from the example above, you could use the $11,500 check to pay off most of your loan, but you would still owe your lender $1,500, which is referred to as the deficit. Fortunately, though, if you had gap coverage at the time, your policy would also pay the $1,500 deficit, leaving you owing nothing.
If you currently do not have collision coverage on your car or gap coverage, it might be wise to consider adding both types, as they would provide you with coverage in this type of situation. You can learn more by talking to an auto insurance agent about your needs.