Expert: Richard Hixenbaugh - 8/28/2009

Question
This is a follow up to a previous question where an expert shared that since my car was totaled and the lienholder probably has insurance on my car in case I let me insurance lapse (which I didn't), I may have a shot at getting the car replaced through "my own insurer" vs. taking a low-ball cash payment that will still leave a sizeable debt due. Is "my own insurer" Geico (yuck) or the lienholder - the bank?  Please provide me with some clarity on what to do...additionally, why would it make more sense for the lienholder or my current carrier (Geico) to replace the car vs leaving me stuck??

Answer
Hi Deb,

I'm not sure who answered your question or what they said, but I will do my best to answer.

If you had insurance and your car was totaled, your insurance company will pay you the fair market value of your car which may be less than the amount you owe on the car. Your insurance company is not responsible for paying off your car only the value of the car. Your leinholder would not have purchased coverage unless they were notified that your own coverage had been cancelled.

Insurance companies do not replace vehicles. They only pay in money the value of the totaled vehicle as it was just prior the the collision. If there is a difference in the claim payment and the amount you owe on the car, you will have to make a payment arrangment for the balance with the lienholder. The only exception to this would be if you purchased GAP insurance. GAP insurance is coverage to pay the difference between the value of your car and the loan balance. However, if you did not purchase GAP insurance, you are responsible for the balance.

I hope this helps
Richard Hixenbaugh