If your vehicle is damaged in an accident, the insurance company may total your vehicle if its value is less than the repair costs, or it would not be safe to drive even after repairs are made to it. In this situation, the negligent driver’s insurance company would pay you the Actual Cash Value (ACV) of your vehicle, which is the amount you would need to purchase a comparable used one. However, you should not assume this means that you will receive a settlement check for the ACV.
How the Insurance Company May Pay Your Settlement When Your Auto Is Totaled
Who the insurance company will pay when they total your vehicle will depend on whether your vehicle loan is financed or not. Here is how the payment could be made once a figure is agreed upon:
- No vehicle loan. If you have no loan on your vehicle, the insurance company would pay you the settlement amount.
- Vehicle loan. If you have a balance on your vehicle loan, the insurance company must send the settlement amount—or the portion needed to pay off your loan—to the finance company or bank. If there are any settlement proceeds left, the insurance company would write you a check for the balance. Often the settlement check will be issued to your lender and you, and you would need to endorse the check before sending it to your lender. Once the lender receives the payment, it would send the insurance company the title to your vehicle.
If you owe a loan on your vehicle, you may be shocked to discover that the settlement with the insurance company does not cover the balance owed. That is because vehicle values depreciate instead of increase in value. Often people owe more on their loans than their vehicles are worth. If you still owe a balance on your auto loan after your settlement proceeds are paid to your lender, you would owe this amount and should make payment arrangements with your lender.
Property damage claims can be surprisingly complicated. Our experienced car accident attorneys handle these claims, as well as claims for the personal injuries suffered. Call our office to schedule a free consultation to get your questions answered and learn how Brauns Law can help you negotiate your settlement.