Car accidents are a distressing reality, with almost 50,000 Americans losing their lives on U.S. highways each year, as the New York Times reported. In the aftermath of a severe collision, one of the most daunting concerns is the status of your vehicle. If your car is totaled by your insurance company, it can lead to a complicated financial situation. You may find yourself in debt. This article takes you through the steps to take if your car is totaled and helps you avoid financial pitfalls.
Ensure Everyone’s Safety First
Before worrying about the fate of your vehicle, ensure the safety of all parties involved in the accident. Call 911 to report the accident and seek medical attention if necessary. Prioritizing health and safety is paramount in any collision scenario.
Contact Your Insurance Company
Once you’ve confirmed everyone’s safety, the next step is to contact your insurance company. Notify them of the accident and provide all the necessary details. Your insurer will then assess the damage and determine if your car is indeed totaled.
Understand What Totaled Means
So, in the world of insurance, they’ll say your car’s ‘totaled’ when it costs more to fix than what it’s worth. Your insurance folks come to you with a payout based on what your car was worth.
Review Your Settlement Offer
Listen up; it’s really important to go over that settlement offer from your insurance folks with a fine-tooth comb. Sometimes, the cash they’re willing to shell out won’t cover what you still owe on your car loan, and guess who’s stuck picking up the tab? Yeah, you might end up in debt because of this.
If you own the car outright, the settlement will go directly to you. However, if you have an outstanding auto loan, your lender will typically receive the settlement amount first to pay off the remaining balance. If there’s a shortfall between the settlement and your loan balance, you may be responsible for covering the difference, potentially resulting in debt.
Understand Gap Insurance
Gap insurance is a valuable add-on policy that can help protect you from owing money on a totaled car. It covers the ‘gap’ between the ACV of your car and the amount you owe on your auto loan. If you have gap insurance, it can prevent you from falling into debt in the event of a total loss.
Keep Your Options Open
For car buyers, the car-buying process has evolved significantly, with 60% of it occurring online, typically as research, according to Deloitte. When your car is totaled, you can accept the settlement and move on. You also have the option to negotiate for a higher settlement with your insurer. Another option is to buy back your totaled car from your insurance company and repair it. Your last option is to use the settlement to purchase a new or used car.
Research Replacement Vehicles
Let’s say you’re planning to use your payout for a new set of wheels. Think about what you can afford, the kind of car that suits your lifestyle, and if there’s a brand or model you fancy. Just to give an idea, last year, 204,609
Jeep Wranglers were sold, so popularity plays a big role in availability and price.
Be Prepared for Financial Adjustments
You may need to make financial adjustments if your totaled car leaves you with a gap between the settlement and your auto loan balance. Options include paying off the remaining debt in a lump sum or rolling it into a new car loan. You can also negotiate with your lender for a repayment plan.
Dealing with a totaled car can be a stressful and financially challenging situation. Remember that safety should always be the top priority in any car accident, and taking the necessary steps to protect your health is crucial.