Dealing with a totaled car can be an extremely stressful and overwhelming experience. Your mind races with questions and uncertainty. What will I do for transportation? How will I afford a new car? Most troubling of all: Who gets the insurance check?
This question often arises when you still owe money on an auto loan or lease. And the answer has significant financial implications.
What Happens When a Car is Totaled?
A car is considered “totaled” or a “total loss” when the cost of repairing it exceeds a certain percentage of its pre-accident value. In Nevada, Nevada Revised Statute § 487.790 defines this threshold as 65% of the vehicle’s fair market value.
For example, if your car was worth $10,000 before the accident and the repairs would cost $6,500 or more, your car would be deemed a total loss. However, if the repairs cost $5,000, it would not be considered totaled under Nevada law.
Insurance companies use various methods to determine a vehicle’s pre-accident value, often referred to as the Actual Cash Value (ACV). This includes factors such as the make, model, age, mileage, condition, and market prices for similar vehicles in your area.
Where Does the Insurance Check Go When You Have a Lienholder?
So, who gets the check when your totaled car still has an outstanding loan or lease balance?
In this scenario, the insurance company’s first obligation is to pay off any creditors tied to the vehicle’s financing. This ensures their financial interests are made whole after the total loss.
The insurer will issue a settlement check to cover the vehicle’s actual cash value (ACV) minus your deductible. This check will be sent directly to your lender or leasing company to settle your remaining loan or lease balance.
If any money is left over after paying the lienholder, the surplus is paid to you, the policyholder.
What If the Payout Doesn’t Fully Cover What I Owe?
Unfortunately, gaps often exist between what your vehicle is worth and what you still owe in financing payments.
If the insurance settlement fails to satisfy your full loan balance, you become responsible for making up the difference out-of-pocket. And unless you carry gap insurance, this difference gets passed along to you.
Gap insurance is specifically designed to bridge this common gap by covering the shortfall between your car’s depreciated value and any remaining loan obligations.
Without it, you carry all the financial risk created by the discrepancy in value versus the amount owed. This burden can be significant with newer vehicles that depreciate rapidly.
Do I Have Any Recourse if the Offer Falls Short?
If you find the settlement to replace your totaled car unsatisfactory or insufficient, a few options exist:
- Negotiate a higher settlement amount. Compile evidence, such as used car listings and condition reports, to justify boosting the vehicle’s valuation.
- Explore loan options to cover any gaps plus a replacement down payment.
- If your payment obligation now exceeds your financial means, consider voluntary repossession. This preserves your assets and credit standing, rather than defaulting.
- Consult an attorney as a last resort. An experienced lawyer may identify grounds for legal action, especially regarding excessive depreciation or negligence.
While the insurance check routing puts creditors first after a total loss, multiple paths forward exist for you—the policyholder. An attorney can clarify avenues to minimize financial harm while negotiating the highest possible settlement on your behalf.
Steps to Take After Your Car is Declared a Total Loss
Managing the total loss process presents many hurdles. But following these key next steps will smooth the road ahead:
File Your Claim
Contact your insurance provider immediately to begin your claim. Supply details, photos, police reports, and any evidence available. An adjuster will be assigned to assess damages and value your car.
Understand the Settlement Details
Carefully review the adjuster’s settlement breakdown. Ensure you agree on the vehicle valuation before deductions. Ask questions if the calculations are unclear.
Settle Outstanding Loans or Leases
If applicable, your lender or lessor will receive payout funds to cover your remaining balance. Confirm details with them directly as needed.
Review Remaining Options
If the settlement falls short of your obligation, or if a gap emerges between the value and amount owed, revisit the alternatives outlined earlier.
Complete Claim Finalization
Finally, sign paperwork to finalize the claim and transfer the title. Then deposit any surplus funds issued to you after creditors are paid.
Protecting Your Assets with the Help of a Family Lawyer(Opens in a new browser tab)
Finding the Support You Need
Suffering a total loss often brings financial uncertainty. But finding answers and regaining stability starts with asking the right questions—like “Who gets the insurance check for my totaled car?”.
At Benjamin Durham Law Firm, our experienced car accident lawyer in Las Vegas team guides clients through the claims process with competence and compassion. We’re here to eliminate doubts, fight for your best interests, and put your mind at ease during this difficult situation.
Don’t hesitate to contact us online or call 702-631-6111 for a free, no-obligation consultation today.