What happens if my car is totaled in an accident and I still owe money?

If you’re in a car accident, there are probably a lot of questions going through your head about your insurance. Your car might be pretty badly damaged (although hopefully you, the other drivers, and any passengers are all okay.) You’re probably wondering if your insurance will cover you. Then you’re probably wondering if your car is totaled or not. And if it is…what if you still owe money on your loan? We’ll explain what happens.

First of all, will your car insurance cover you?

If you are at-fault in the accident, you would need collision coverage in order to have your car repaired or replaced by your insurance company. Liability insurance only covers your legal obligations (medical expenses, car repairs, etc.) to the other driver. Collision coverage can repair or replace your car if you’re at-fault in an accident.

If your car is damaged by something other than an accident, such as a falling tree, fire, animal strike, or theft, you would need comprehensive insurance for the loss to be covered.

Note: If your car is leased or financed, your lender will most likely require you to have collision and comprehensive insurance for your vehicle.

It’s so important to make sure that you have enough insurance to fully protect yourself financially in case of an accident. (The good news is that getting auto insurance quotes is easy. You can just fill out our online quote form or call us today.)

Is my car totaled?

If you’re in a car accident and your car is damaged, it may not be immediately apparent if it’s totaled or not. From an insurance standpoint, a car is typically considered to be totaled if the cost to repair the vehicle exceeds a certain percentage of the cost of replacing the vehicle.

Some states have set a standard for determining if a car is totaled. That means that the state has decided that if repairs cost more than a certain percentage of the vehicle’s value (it could be something like 80% of the value) it will be declared totaled. Insurance companies usually find out the value of the vehicle and how much it will cost to repair it with special formulas. They also usually have set their own “totaled” percentage (within the state’s requirements.)

If your car is totaled, the insurance company will reimburse you for its ACV.

Protect your car & save money. Get a quick auto insurance quote today.


What if my car is leased or financed?

If your car is still leased or financed, the lienholder gets dibs on the insurance money, which will be put towards the loan balance. The check from the insurance company will most likely include the lienholder.

What if I don’t get enough insurance money to cover my loan balance?

Ideally, your check from the insurance company would be enough to cover the rest of the balance on your car loan so that it can be paid off. (Well, super ideally there would be some money left over for you.) But what if the loan balance is more than the check you got from the insurance company? Car values depreciate quickly, so it could happen.

For example, let’s say you buy a car for $22,000 and take out a loan in that amount. A year goes by and the car’s value has gone down quite a bit. You get into an accident and the car is totaled. You get a check for $17,000, but the loan balance is $19,000. You’d be responsible for paying the lender the remaining $2,000 unless you have gap insurance, which is designed with this situation in mind. Gap insurance (usually intended for brand new cars) could cover this “gap” between the loan balance and the amount on the check you receive from the insurance company.

Basically, you would still have to make your monthly payments until the loan is paid off.

insurancehub get insurance quote

To simplify, a car is usually declared totaled if the cost of the repairs is above a certain percentage of the value of the vehicle. If you still have a car loan, the insurance money will go to the lienholder first to cover the balance of the loan (although if there’s any extra, it’s yours.) If you don’t get a big enough insurance check to cover the loan balance, you’re still responsible for making your payments until the loan is paid off.

When it comes to getting car insurance, we can help. Our team of insurance agents is really good at helping people get great coverage at a great rate, and we can help you save money on car insurance. To get started with your car insurance quotes, you can fill out our online form or give us a call today.