Car Insurance After Accident
Reader’s Question:
Whats going to happen if my vehicle is totaled in an accident?
Jim
Chicago, IL
When your vehicle is totaled, the insurance carrier has an obligation to “make you whole,” as that is defined in your car insurance policy.
Most car insurance policies value your car using Actual Cash Value. “Actual Cash Value” meaning replacement value less depreciation.
This essentially means that you have to be left in approximately the same financial position (with respect to the item insured – not in respect to any leases or liens that hold title to your vehicle) you were in before the accident.
If you have physical damage coverage (collision and comprehensive) the insurance carrier will typically write you a check for the actual cash value of the car, less any deductible on your car insurance policy. If the cash value is less than your current loan amount or if you are “upside down” (“Upside down” means owing more on a car than it’s worth.) on your loan or then you may consider GAP insurance. In this case, if you don’t have GAP insurance then you would be responsible toward your loan for the remaining balance.
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