Getting into an accident and surviving without any major injuries is extremely fortunate. The well being of the driver and the passengers is always the first concern of everyone. However, upon discovering that everyone is safe from harm anyone that has been involved in an accident will usually check their car for damage. If you are fortunate to survive an accident that leaves your car completely wrecked you may wonder how your insurance will deal with a car that is completely totaled and what benefits are available to you until you can obtain another vehicle.
Before an insurance company will consider a car irreparable there are certain requirements that must be met. There is usually a formula to determine what a car is worth in comparison to the cost of repairing the vehicle and other expenses such as rental car fees and towing. If it costs more to fix a car than what it is worth at the time of the accident then a car is usually considered a "total loss". It is not economically sound to pay in excess of a car's worth on repairs. Once your insurance company determines the worth of your car you will be issued a check. This check can be used to purchase a new car or it can be sent to the financing company to pay off the car. Since a car's value decreases as soon as you drive it off the car lot, there is a possibility that if you are leasing or financing a car the total amount remaining on your note may not be fully covered leaving a balance due.
For people worried about car value depreciation there is gap insurance that can be purchased as an addition to regular car insurance. Gap insurance will pay for the remaining balance of a car loan if you should total your vehicle. For example, if you purchased a $15,000 car a year ago and had an accident two weeks ago and your insurance company determined that your car is now worth $10,000 you are left with a $5,000 balance on your car loan. With gap insurance the $5,000 would be paid off. Gap insurance prevents a driver from having to worry about paying off a car that is no longer in their possession.
Understanding your insurance company's policies on monetary compensation for severely damaged vehicles can help you make more informed choices concerning any additional auto insurance coverage you may need.
Before an insurance company will consider a car irreparable there are certain requirements that must be met. There is usually a formula to determine what a car is worth in comparison to the cost of repairing the vehicle and other expenses such as rental car fees and towing. If it costs more to fix a car than what it is worth at the time of the accident then a car is usually considered a "total loss". It is not economically sound to pay in excess of a car's worth on repairs. Once your insurance company determines the worth of your car you will be issued a check. This check can be used to purchase a new car or it can be sent to the financing company to pay off the car. Since a car's value decreases as soon as you drive it off the car lot, there is a possibility that if you are leasing or financing a car the total amount remaining on your note may not be fully covered leaving a balance due.
For people worried about car value depreciation there is gap insurance that can be purchased as an addition to regular car insurance. Gap insurance will pay for the remaining balance of a car loan if you should total your vehicle. For example, if you purchased a $15,000 car a year ago and had an accident two weeks ago and your insurance company determined that your car is now worth $10,000 you are left with a $5,000 balance on your car loan. With gap insurance the $5,000 would be paid off. Gap insurance prevents a driver from having to worry about paying off a car that is no longer in their possession.
Understanding your insurance company's policies on monetary compensation for severely damaged vehicles can help you make more informed choices concerning any additional auto insurance coverage you may need.
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