So My Car is Totaled and I owe More than What it is Worth. What happens now?
In this scenario a couple of things can happen. First, the insurance company will make payment to the lender for the calculated value of the vehicle. The next part is where it is important to know the terms agreed upon with your lender. If additional money is owed on the vehicle after the insurance payment is made, it is generally the responsibility of the vehicle owner to pay the difference to the lender.
However, there is another type of insurance that can come into play for this scenario should you have it. That is Gap insurance. This can be offered through a lender or insurance provider. This type of coverage also known as guaranteed auto protection insurance protects you from having to pay the difference between what is owed to the lender and the amount paid by the insurance company in the event there is total loss. This type of coverage is generally purchased around the time that the vehicle is bought.
Gap coverage can often be added to the collision portion of your insurance policy. It is generally purchased on newer vehicles where the above scenario is most likely to play out. Be sure to do your research as often the coverage offered by dealerships is overpriced. While lenders and credit unions can offer this for less than dealerships, you can do even better by adding this through your auto insurance company. It can be included when the new auto is added to the policy and it is an affordable option. After all, you just bought a new vehicle, you don’t want to over pay on the gap insurance. As your agent we will be happy to discuss this with you.