If your car is totaled and you don’t have gap insurance, you will be responsible for paying the remaining balance of the totaled car’s loan or lease. Even if you are not at fault for the accident, the at-fault driver’s liability insurance will only cover your vehicle’s actual cash value, not the remainder of any loan or lease.
Options If Your Car Is Totaled and You Don’t Have Gap Insurance
If your car is totaled and you’re at fault, collision insurance will pay for the actual cash value of your car, minus any deductibles. While it won’t pay off your remaining loan or lease, it can at least help you recoup some of the costs.
New Car Replacement
With new car replacement insurance, your insurer will pay to replace your totaled vehicle with a brand-new car that has a similar make and model. In practice, this means they’ll pay for the difference between your totaled vehicle’s actual cash value and the cost of a new replacement.
If you have new car replacement instead of gap insurance, it may cover your remining loan balance, too, or that may just be rolled over to the new vehicle, depending on your insurer and lender.
Negotiate Your Car’s Worth
In some instances, you may be able to negotiate with your insurance about the worth of your totaled car. While this isn’t a guarantee, if you can prove your car was worth more than they estimated it, you may be able to at least get a little more than you originally planned.
Roll the Negative Equity
When you purchase or lease a new vehicle, you may be able to roll whatever you still owe on your totaled car – the “negative equity” – into your new agreement. While you’d technically still owe that money, you’d be able to pay it off in conjunction with your new vehicle’s payments, making it a little less burdensome.
To learn more, check out WalletHub’s guide to gap insurance.
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