The car accident wasn’t your fault, and you survived — but your car didn’t. The insurance company now says that your car is totaled because of someone else’s carelessness. You don’t have a car and don’t know what to do next. This guide tells you what you need to know to get your damage claims paid when you weren’t at fault for an accident.
Getting into a car accident is stressful enough. Finding out your car is totaled makes it even worse And then learning you don’t have gap insurance to cover the difference between what your car is worth and what you still owe on it can feel like insult to injury
This is an unfortunate situation many drivers find themselves in I want to provide some advice on steps to take if you have no gap insurance and your car is totaled in an accident that wasn’t your fault
Understanding Gap Insurance And Why It’s Important
Gap insurance, also known as auto loan/lease coverage, is an optional add-on policy you can purchase when financing or leasing a new or used car. It covers the “gap” between what your car insurance pays if your vehicle is totaled (the actual cash value or ACV) and the remaining loan balance you still owe to the lender.
For example, say you buy a car for $20,000 and finance it over 5 years After 2 years you still owe $12,000 on the loan. Then the car is totaled in an accident The insurance company determines the current ACV is only $10,000. Without gap insurance, you’d be stuck owing $2,000 to the lender for a car you no longer have. Gap coverage pays that difference.
Gap insurance is important because cars depreciate quickly. In the first years of ownership a new car can lose 20% or more of its value annually. This creates a gap between the car’s worth and the remaining loan balance. Gap insurance protects you from this loss.
Why You Might Not Have Gap Insurance
There are a few reasons you may not have gap coverage if your car is totaled:
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You purchased the car outright with cash so there was no financing (thus no need for gap insurance).
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You leased the car but declined the gap coverage thinking you didn’t need it.
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You financed the car but didn’t understand what gap insurance was so you turned it down to save money on the monthly payment.
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You originally had gap but stopped paying for it at some point during the loan term.
Regardless of why gap lapsed or was never purchased in the first place, you now find yourself facing an unexpected financial loss. What can you do in this situation?
File An Insurance Claim Right Away
If your car is totaled in an accident that is not your fault, the first step is to file a claim right away with the at-fault driver’s insurance company. This starts the process of getting compensation for your vehicle.
Provide details of the accident, proof of insurance coverage, and any evidence showing the other driver was liable (police report, photos, witness statements, etc). Cooperate fully with the claims adjuster and provide any documentation they request.
The sooner you open a claim, the faster the insurance company can investigate the accident, determine fault, and issue a settlement for the value of your car. This gets you one step closer to being made whole again.
Review Your Car Loan Documents
Next, dig out your car loan paperwork and give it a thorough review. Make note of:
- The lender’s name, loan account number, and contact information.
- The total original loan amount and repayment terms.
- The current payoff balance still owed.
- Whether gap insurance was included in the loan contract. Double check it did not lapse.
- Any clauses about total loss coverage responsibilities.
This will provide all the details about where you stand on the loan and what options you may have available. Share this paperwork with the claims adjuster as well.
Ask The Lender About Loan Options
Contact your auto loan lender to discuss options for managing the remaining balance without a car. There are a few possibilities that may provide some relief:
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Loan balance forgiveness – Some lenders may forgive all or part of the gap balance if it was not your fault and you have a good payment history. This usually requires negotiating.
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Defer payments temporarily – The lender may let you defer or skip payments for a month or two right after the accident if you’re facing a financial hardship. This gives you time to sort things out.
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Extend the loan term – Rather than paying the balance as a lump sum, the lender may allow you to extend the loan term so the payments are lower each month. This makes the balance more manageable.
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Use gap insurance refund – If you canceled gap insurance at some point but got a partial refund, the lender may let you apply that refund towards the balance.
Ask the lender to explore any and all options to help you, since the accident and lack of transportation was out of your control. Politely but firmly advocate for yourself.
Use The Insurance Settlement To Pay The Loan
When the at-fault driver’s insurance company issues a settlement check for your totaled car, the funds typically first go to pay off your lender to settle that loan obligation.
Any remaining amount after paying the lender is yours to use for a replacement car and other losses. If the settlement does not fully pay the loan, work with the lender on how to handle the remaining gap.
Getting the loan paid off quickly should be a top priority to avoid further interest charges accumulating. Discuss the payoff process with both the lender and insurance company to ensure it goes smoothly.
Explore A Personal Loan For The Balance
If loan forgiveness, deferment, or using the insurance money doesn’t fully close the gap, taking out a small personal loan for the remaining balance may be an option. An unsecured loan gives you predictable monthly payments, fixed interest, and a clear repayment term to pay off the deficit.
Online lenders like LendingTree, Lightstream, and Credit Karma offer quick loan decisions, reasonable rates, and fast funding. This can be a simple way to cover the gap without it dragging out.
Consult An Attorney For Possible Legal Action
Finally, if the insurance settlement does not make you whole on the value of your vehicle and loan balance, it may be worth consulting an attorney to review your legal options. They can determine if the insurer offered a fair settlement and if pursuing further compensation is viable.
An attorney can file claims, negotiate a higher settlement, or even take the negligent driver to court if needed. While not ideal, legal action can sometimes resolve gaps and deficiencies in insurance claims. Your attorney will handle the process for you.
Key Takeaways
Having a totaled car and no gap insurance is not an easy situation. But by taking proactive steps like filing an insurance claim right away, carefully reviewing your loan details, exploring lender options, using the settlement wisely, looking into a personal loan, and consulting an attorney, you can overcome the financial hurdle and get back on the road.
The accident was not your fault, so you should not be stuck owing for a vehicle you can’t drive. Do everything possible to eliminate the debt gap and minimize the headaches from the unfortunate situation. Don’t give up until the matter is resolved. With persistence and a methodical approach, you can recover and move forward.
Who Pays for the Totaled Car After an Accident?
In most states, the insurance company of the careless or at-fault driver is responsible for paying for damages caused by the accident. If you are at fault for the accident, your insurance will cover other people’s damages. Your collision coverage will provide coverage for your own vehicle.
You can still get your money back even if the driver who caused the accident doesn’t have insurance or doesn’t have enough insurance. If you have collision or uninsured motorist insurance (UIM) on your policy, you can use them to make a claim.
But if you don’t have valid insurance when the accident happens, you may not be able to get as much money. If you don’t have collision insurance and total your car, your insurance company won’t pay you the ACV of your car.
If the other driver won’t say they were at fault, the insurance companies will do their own investigation to find out who is at fault. In this case, your insurance company will try to get the cost of your collision claim and deductible back from another insurance company through a process called subrogation.
What to Do When Your Car Totaled Not At-Fault
If your car is totaled and you weren’t at fault, you’ll need to file a claim and get the right paperwork as soon as possible in order to get full compensation for all of your accident-related losses. Here’s what to do.
What Happens If You Total Your Car With No Gap Insurance?
FAQ
How does insurance work when it’s not your fault?
Why did my gap insurance not cover my car?
Is gap insurance Pointless?
Can gap insurance deny claim?
Do I need GAP insurance if my car is totaled?
You only need gap insurance if your loan balance exceeds your totaled car’s value. If you’ve had your financed car for a while, there’s a good chance that you’ve paid off enough of your loan amount to catch up with the car’s actual cash value. MORE: How to calculate total interest paid on a car loan What does it mean if your car is totaled?
What happens if I total a financed car without GAP insurance?
or lease. If you total a financed car without gap insurance, the insurance payout will be limited to the actual cash value (ACV) of the car, which may not cover the remaining balance on your loan.
Do I need GAP insurance?
Whether you need gap insurance depends on how much you have left on your car loan or lease and what the vehicle is worth. If you have enough money not to care about the “gap,” you likely don’t need gap insurance.
Can I get GAP insurance after a car accident?
No, you cannot get gap insurance after an accident and have it applied to the accident you were just in. You may be able to get gap insurance for future accidents, but only after a minor accident in a fairly new car – not if your car was totaled.