What happens if your car gets totaled and you still owe money?
If you have financed or leased a vehicle, you have entered into a contract promising to pay the agreed-upon amount, plus interest, in exchange for the vehicle. Unfortunately, that contractual obligation does not end even if your car is totaled in an accident. There are a few variables that can have a major impact on your financial income in these situations. A skilled Los Angeles personal injury lawyer can help you explore your options and determine how to best position yourself for a positive outcome.
When is a car totaled?
A vehicle is “totaled” when the estimated cost of repair is greater than the fair market value for which it could have been sold before the accident. The fair market value is can be determined by inputting the make, model, year, and condition into a mainstream auto value guide like Edmunds, Kelly Blue Book, or NADA Car Guides.
The insurance company (either the other party’s or your own, depending on who may be responsible for paying the damages) makes the determination of whether the car is totaled. It is important to know your rights though; you may have the right under the insurance policy to go through a dispute process known as an appraisal. However, this right needs to be balanced with the potential cost of hiring an appraiser and possibly an arbitrator.
Who was at fault for the accident?
When a car is totaled, whether insurance will pay out depends on who was at fault and what the policy covers.
If the other party was to blame for the accident, his insurance, if insured, will make the determination of whether the car is totaled and issue a settlement check. If the other party was not insured, you could recover from your own carrier if you had UM/UIM coverage in place. If you were to blame, your insurance may pay under your policy, but it will depend on whether you have comprehensive coverage.
Liability is not always clear-cut in favor of one party or the other. The parties, and therefore their insurance companies, will be responsible for the proportion of the damages that they caused. So, if your car was totaled and you were 25% to blame, the other party’s insurance carrier would be responsible for 75% of the loss while your comprehensive coverage policy would pay 25%.
What are the limits of insurance?
Unfortunately, the limits of the applicable insurance – whether your own or the other party – may not be enough to cover a high balance on a vehicle. The minimum coverage in California is only $5,000 in liability-based property damage. If you did not opt out of uninsured motorist coverage, it covers $3,500 in property damage. If you and the other driver each carry the minimum coverage, the other driver is completely at fault, and you owe $15,000 on the vehicle, you may still owe $6,500 after the settlement.
If you owe a significant amount on your vehicle, it is worthwhile looking into “gap insurance”. This will pay the difference between the actual cash value of the car and the amount still owed to the lender or leasing company. It makes the most sense to obtain this coverage at the start of the loan period.
What if the remaining balance is more than the car was worth?
The unfortunate reality is that if there is not adequate insurance to cover the amount due on the vehicle, you could be left liable for the difference – potentially thousands of dollars. The best protection against this comes well before the accident, when you make your insurance decisions.
If you also suffered injuries in the accident, your bodily injury claim may include amounts for pain and suffering that you could then put toward the balance owed. Each case is unique and you are best served working with an experienced personal injury attorney who knows how to advocate so that you can meet all of your financial obligations.
Obtain a free consultation with a car accident lawyer
A serious accident is a trying experience on many levels. When a crash threatens to cause physical and financial hardship, it helps to have a committed legal advocate on your side. Discuss your case with a Los Angeles car accident lawyer at Ellis Injury Law to get an idea of your rights and responsibilities. We offer convenient office locations in Los Angeles and throughout Southern California. All consultations are free and confidential.