The insurance pays the lender. The lender then has you pay the remaining balance of the loan, after the sum of the insurance payment is taken out. It's so unfortunate, but it happens to a lot of people. Just a note to anyone with a similar situation... When you purchase a new vehicle, you should inquire from your insurance agent, how much extra it would be to add "Lease Gap" or "Loan Gap" coverage. This is generally only available from an A-rated company such as American Family or State Farm, and only for the first 4-5 years of a car's life. The great thing about this coverage, is that if the car ends up as a total loss, the insurance company will pay the difference between fair market value and what you owe the lender, eliminating the excess amount due to the lender. Just a recommendation. Any questions, email me email@example.com Thanks Sean
You can only collect the fair market value or retail book value depending on the regulations as established by your state's insurance commissioner. The only way you can collect the difference between the Actual Cash Value of your vehicle and the Payoff is through GAP insurance. This is usually offered to you during the purchase of your vehicle but can be purchased later. At the time of purchase, the offer to purchase GAP insurance may seem like a ploy by the salesman to sell you something you don't need. However GAP insurance is a valuable option should this situation arise. GAP insurance is what its name implies, insurance coverage for the "GAP" between the fair market value of your vehicle and the payoff amount.
If repair costs are up to 76% of the vehicles value then the vehicle is totaled. Whichever option is least expensive is the one they go with but you will never find one that is going to actually replace your car, just give you the estimated value at the time. If you have ever had a car totaled you know that you never get enough to replace it.
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