Understanding what happens to your vehicle when damaged by an at-fault driver

Have you found yourself asking, What happens when I get in an accident and the other driver is at fault and totals my car? Will their insurance cover the rest of what I owe on the vehicle since they were at fault?

The short answer is that the insurance of the at-fault party will cover the fair current market value of your totaled vehicle. However, it’s crucial to understand the nuances of this process to protect your financial interests.

Insurance Coverage for Totaled Vehicles

When a car is totaled, the insurance company typically has a few options:

Repair the vehicle Replace the vehicle Pay the actual cash value of the car

In most cases, the at-fault driver’s insurance will pay the actual cash value of your car, not how much you owe on the loan. This value is often based on the current market value, not the outstanding loan amount.

Common Misconceptions

Many people mistakenly believe that the insurance will cover the full amount of what they owe on the vehicle. However, this is not always the case, especially if the vehicle is newer. Insurance companies tend to replace rather than repair a vehicle if the damage is extensive, and they determine the vehicle's fair market value.

It's also important to note that there are special situations where the insurance cover may differ. For example, if the totaled vehicle is under 2 years old, most insurance companies deem it a new vehicle and replace it entirely rather than pay based on the vehicle's current value.

Impact of Owning a Vehicle with an Outstanding Loan

If you own a car but owe more to the bank than the current value of the vehicle, you are still responsible for the difference in the event of a total loss. There are options to mitigate this risk through GAP (Guaranteed Asset Protection) insurance.

GAP insurance covers the difference between the amount you owe on the loan and the actual cash value of the vehicle in the event of a total loss. This can protect you from having to pay the remaining balance on your loan.

Legal and Financial Considerations

With the information provided, it’s impossible to give a definitive answer without more details on your specific situation. It’s best to consult with your insurance provider and, if necessary, seek legal advice to understand your rights and responsibilities fully.

Remember that the at-fault driver’s insurance is only liable for giving you the fair current market value of the totaled vehicle, not how much you still owe on the vehicle.

To sum up, when your car is totaled by an at-fault driver:

The insurance will pay the fair market value of the car, not the outstanding loan balance. Understand the implications of owning a vehicle with an outstanding loan and consider purchasing GAP insurance. Consult with your insurance provider and consider seeking legal advice.

By being informed and proactive, you can protect yourself financially in the event of a car accident.