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A car accident can be emotionally and financially devastating. But when your car is totaled in an accident, the effects can be even more devastating. If your car is a total loss, i.e. it has been declared a total loss by the insurance company, the vehicle is usually no longer repairable or repairs are required that exceed the vehicle’s value.
If Your Car Gets Totaled How Much Does Insurance Pay
Hop in the driver’s seat and buckle up as we explain what it means when your car is totaled, whether your insurance company will cover a total, and more.
What Happens After Your Car Gets Totaled
Standard auto insurance doesn’t usually pay to fix your car if it’s a total write-off. If your car is totaled, the insurance company has decided that the repair will cost more than the car is worth, or that the car simply cannot be repaired. So if the necessary repairs cost $15,000 but the vehicle is valued at $13,000, the insurance company will likely declare it a total loss. In some states, an insurance company may be required to repair your car if the cost of repairs exceeds a certain percentage of the car’s value.
If a car is totaled, the insurance company may owe you the actual cash value of your car, depending on what your car insurance says. The insurance company determines the actual cash value of the totaled car based on the following information about the vehicle:
Actual present value refers to the selling price that the car could reasonably have fetched on the open market before an accident occurred. It’s different from another term you may have heard about auto insurance: replacement value. Replacement cost refers to what it would cost to buy a brand new car comparable to a totaled car. Not all auto insurance companies offer replacement cost as an option.
Keep in mind that your car insurance premium will be higher if you opt for replacement value coverage rather than actual cash value.
What To Do If Your Car Is Totaled
If an insurance company totals your car, it’s usually covered by two parts of your policy: collision damage waiver and comprehensive insurance. If you have a car loan or lease, these two types of coverage are usually required. However, they are not a legal requirement for a car that you have paid off – the decision to have comprehensive or comprehensive insurance is yours. Without insurance coverage beyond the liability insurance required in almost all states, you may have to pay out of pocket to replace your broken down car (especially if you were at fault in the accident).
Comprehensive insurance covers damage or accidents that are not related to a collision. Meanwhile, if your car is damaged in a collision with another car, object or property, collision insurance will cover it.
In some cases, an insurance company may not cover damage if your car is totaled. Here are five possible reasons why your claim was denied:
Please note that each insurance company uses different criteria to declare a car as a total loss. However, a car that is totaled by one insurance company will likely be totaled by another.
How Much Insurance Pays For A Totaled Car: Quick Guide
Insurance experts recommend continuing to pay the loan or lease until the insurance company pays the compensation payment to the lender, even if you can’t drive the car.
When the lender is paid off, what if you still owe money on the car? Unless you have so-called gap insurance, you are responsible for making up the difference between the compensation payment and the loan or rental balance. So let’s say the insurance company paid out the actual present value of the entire car, which was $25,000, but you owe $27,500 on the loan to finance the vehicle. In this case, you are responsible for the remaining $2,500.
Continuing with this example, gap insurance that you purchase on top of standard coverage can fill the gap between the $25,000 claim payment and the $27,500 loan or lease balance. That means you don’t have to make the $2,500 difference yourself. However, remember that Gap insurance only applies if you already have collision damage waiver and collision damage waiver. Gap insurance typically costs about 5% of your annual auto insurance premium, according to the AAA.
Car accidents, even those that total a financed car, don’t directly affect your credit score. Credit scores are based solely on the information on your credit report and don’t include things like your driving records or past insurance claims.
Body Shop Says Cars Are Totaled ‘quite Frequently’ From Deer
To ensure your credit stays intact, work closely with your insurance company and lender to ensure the loan covering the vehicle is properly paid off and completed. Your financial obligation to make car payments doesn’t go away until the loan balance reaches $0, either because the insurance company reimbursed the lender or you paid back what was left after your contribution.
While an accident doesn’t affect your credit score, it can affect your auto insurance premium even if your car is totaled after an accident. You may be able to avoid this if you are eligible for Accident Forgiveness, but this benefit is not available in all states or with all insurance companies. Insurance companies offering it include Allstate, American Family, Geico, Liberty Mutual, Nationwide, Progressive, The Hartford, Travelers, and USAA.
A car insurance claim resulting from an accident involving your car can affect your insurance premium. But it shouldn’t affect your credit score as long as your car loan is somehow paid off. Work closely with your insurance company and lender and keep track of your creditworthiness. Get a free copy of your credit report from all three credit bureaus at AnnualCreditReport.com. You can also view your credit report for free and sign up for free credit monitoring right away. If you’re planning to finance another vehicle to replace the one you just lost, having a good credit score can help you get a better loan offer.
If you’re looking for ways to reduce monthly expenses, it might be a good idea to see if you can save on your auto insurance.
What To Do If Your Car Is Totaled
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What Happens To My Lease Or Loan If My Car Is Wrecked
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What Does It Mean When A Car Is Totaled
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