Does the insurance company have to pay off my car after a car wreck?

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If you owe more than the car is worth, it is important to have GAP insurance.

When you are in a car accident, one of the first issues you will deal with will relate to the damage to your car. There will be multiple insurance adjusters from multiple insurance companies that you will have to deal with. You will have to review damage repair estimates and automobile appraisals to determine if the adjusters are being fair with you. And when the vehicle is undriveable or even a total loss, there will be issues relating to rental cars.

One of the more common questions occurs when you owe more than the car is worth. Does the insurance company have to pay off your car loan?

If you are in a Texas car wreck and you owe a bank $10,000, but the fair market value of the car is only $6,000, the insurance company for the at-fault driver is only obligated to pay you the $6,000.

The at-fault driver’s insurance company is only obligated to pay for the fair market value of the vehicle. Many times, there are ways to dispute the fair market value of a vehicle — such as when there are after-market products or new additions to the vehicle. But, if you owe more than what the car is worth, the insurance company is not obligated to pay off your loan.

If you own a car and owe more than the car is worth, it is important to have GAP INSURANCE. You can learn more about gap insurance by clicking the link, but basically it is insurance that covers the cap between the fair market value of the vehicle and the amount you owe.

If you do not have gap insurance (WHICH YOU SHOULD), there are a few options that some of our Tyler personal injury clients have tried with varying success. Sometimes, if you call the bank that loaned you the money for your vehicle and explain to them your situation, they will sometimes write off the debt or at least work out a payment plan with you. I have also seen some clients finance the debt into a new auto loan when buying their next vehicle.

The only good solution is to have gap insurance. Otherwise, you will likely be on the hook for the full loan value.

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