Wondering What happens if you crash a Financed Car with Insurance?
Crashing a financed car when you have insurance can lead to several outcomes, depending on the type of insurance coverage you have, the extent of the damage, and the terms of your financing agreement.
In this article, we’ll explore what typically happens when you’re involved in an accident with a financed car and have insurance.
1. Assessing the Damage: After the accident, the first step is to assess the extent of the damage to your financed car. This typically involves getting the car inspected by an appraiser or the insurance company’s adjuster. They will evaluate the damage and estimate the cost of repairs or, in some cases, the value of the car if it’s declared a total loss.
2. Filing an Insurance Claim: Once you have assessed the damage, you should contact your insurance company as soon as possible to initiate the claims process. Provide them with all the necessary information about the accident, including the date, time, location, and details of the parties involved. You will also need to provide your policy number.
3. Determining Fault: Insurance companies will investigate the accident to determine who was at fault. Depending on the findings, the responsible party’s insurance may cover the damages or, if you were at fault, your insurance may be responsible. In some cases, if fault cannot be determined, both parties’ insurance may share the costs.
4. Repairs and Restoration: If the car is repairable and the cost of repairs is less than the car’s value, your insurance company will typically cover the repair expenses. You may need to pay a deductible as specified in your insurance policy. The insurance company will work with an approved repair shop or allow you to choose one for the repairs.
5. Total Loss Declaration: If the cost of repairs exceeds a certain percentage of the car’s value, your insurance company may declare the car a total loss. The specific threshold for declaring a total loss varies by insurance company and jurisdiction. If this happens, you will receive a payout from the insurance company, typically equal to the actual cash value (ACV) of the car before the accident.
6. Gap Insurance: If your financed car is declared a total loss, and the payout from your insurance company is less than the remaining balance on your auto loan, you may be responsible for paying the difference. This is where gap insurance becomes crucial. Gap insurance covers the “gap” between the car’s ACV and the amount you owe on your loan, ensuring you’re not left with a significant financial burden.
7. Loan Repayment: Even if your car is declared a total loss and you receive a payout from your insurance, you are typically still responsible for repaying your auto loan in full. The insurance payout goes toward your loan balance, but any remaining amount is your responsibility. Gap insurance can help cover this balance.
8. Repairing the Car: If your car is repairable, it will be fixed, and you can continue to drive it. Keep in mind that repaired cars may have a diminished value compared to their pre-accident condition, which can affect the car’s resale value.
9. Insurance Premium Impact: Being involved in an accident can affect your insurance premiums. If you were at fault, your premiums may increase, especially if the accident resulted in a significant payout. This increase can vary based on the severity of the accident, your driving history, and your insurance provider.
10. Legal Consequences: Depending on the circumstances of the accident, there may be legal consequences. If the accident resulted in injuries or significant property damage, you may face legal actions, including lawsuits or fines. It’s essential to consult with an attorney if you’re facing legal issues related to the accident.
Note that when you crash a financed car with insurance, the specific outcomes depend on the extent of the damage, the terms of your insurance policy, and whether the car is repairable or declared a total loss.
It’s crucial to have the right insurance coverage, including gap insurance, to protect yourself financially in case of an accident.
Additionally, being a responsible and cautious driver can help prevent accidents and the associated consequences.