The total loss check will be issued to the owner of the totaled vehicle if the car has been paid off and the owner holds the title, meaning that there is no remaining loan payment for the car. If, however, the vehicle is being financed, the insurance company will have to determine the payoff amount of the vehicle. If the total loss settlement exceeds the payoff value, the insurance company will generally issue one check for the amount of the remaining loan to the finance company, and a second check to the owner for the difference. But if the total loss check does not exceed the pay-off amount, the insurance company will issue the check to the financing company, and the owner will owe the remaining balance to the finance company unless the owner purchased “gap insurance” or “gap coverage.”
Gap insurance or gap coverage is intended to protect automobile owners from being upside down on their loan when their vehicle is unexpectedly totaled and they owe more on the loan than their car is worth. This happens frequently, especially when the vehicle is financed for a longer term, such as five, six, or seven years. Usually, gap insurance or gap coverage is purchased at the time that you purchase the vehicle. If you are unsure about whether you have gap coverage, you may be able to find out by calling the car dealer where you purchased your vehicle.
Another kind of insurance that you may have purchased to protect against owing on a totaled car when the loan exceeds the value of the car at the time of the accident is called “repair or replacement” coverage. If you have repair or replacement coverage, it requires your automobile insurance company to pay either the reasonable cost of the repairs or the cost of a replacement vehicle, whichever is less.
We have helped numerous clients resolve their property damage and personal injury claims. If we represent you for personal injuries, we will assist with your property damage claim at no cost to you. We help clients level the playing field against large insurance companies. For assistance with your claim, contact our personal injury attorneys at (919) 800-2000.