Auto Insurance Claims/Totaled Car

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Expert: webfoot - 9/12/2006


Question
I was in an accident where I was the only one invovled. After my insurance company looked at my car they totaled it claiming is would cost more to repair than the car is worth.  

I still have a loan on my car. In fact, it's an upside down and the amt the insurance company is offering will not pay the loan off.  My question is does the insurance company have to pay the settlement to the lien holder or can the check be written out to me?

Answer
The insurance company has a legal obligation to pay the lien holder.  Not only is it a legal obligation, but it is also the only way that they can get the title to the car so the salvage can be disposed of.

I'm sorry to hear about your situation.  This is becoming a very common problem as finance companies/banks/dealers will write loans all day long for more than a vehicle will be worth in a year, yet vehicles still depreciate at the same rate.

Depending on the finance company, you may have the option of what is called an "exchange of collateral" where they may be willing to keep the existing loan in place in exchange for title on a similar vehicle that would be purchased with the insurance settlement.  This is only done with the permission of the lien holder.
 My only other advice is to purchase what is called "Gap" insurance on any future car loans that will cover the negative equity in the event of a total loss.

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webfoot

Expertise

Auto damage, liability, insurance fraud. I am a full time auto insurance adjuster with experience in collision, theft, liability and fraud investigation. I am also an ASE Master Auto Tech and I-Car Collision Platinum certified. My experience includes 15 years in the auto repair industry, a B.S. in Criminal Justice, Law enforcement and auto insurance. ****** NO "PRIVATE" QUESTIONS WILL BE ANSWERED. I HAVE FOUND THAT NEARLY ALL PRIVATE QUESTIONS COME FROM PEOPLE WHO ARE CONSIDERING OR ATTEMPTING TO COMMIT FELONY INSURANCE FRAUD AND I'M NOT HERE TO HELP YOU! ****** I AM HERE TO ANSWER AUTOMOTIVE REPAIR, CLAIMS PROCESS AND SOME SIMPLE LIABILITY QUESTIONS. I CANNOT ADDRESS COMPLEX LIABILITY SCENARIOS WITHOUT HAVING ALL OF THE INFO FROM BOTH SIDES IN FRONT OF ME. QUESTIONS ABOUT PREMIUMS OR HOW INSURANCE IS RATED SHOULD BE ADDRESSED TO YOUR PERSONAL INSURANCE AGENT WHO KNOWS A WHOLE LOT MORE ABOUT YOUR HISTORY THAN I DO. I'VE NEVER SOLD INSURANCE AND DO NOT KNOW IF YOUR INDIVIDUAL INSURANCE RATES WILL GO UP IF YOU MAKE A CLAIM. THOUGH I'VE HANDLED SOME VERY MINOR SOFT TISSUE INJURY SETTLEMENTS, I PREFER NOT TO ANSWER INJURY RELATED QUESTIONS. I'M NO INJURY EXPERT AND I'LL LIKELY SAY SOMETHING TO HURT SOMEONE'S FEELINGS AS I BELIEVE THAT MANY SOFT TISSUE PAIN AND SUFFERING CLAIMS ARE OVER DRAMATIZED. UNLIKE MANY OTHERS, I AM ON THIS FORUM AS A VOLUNTEER WITH NO PRODUCTS OR SERVICES TO SELL AND PROMISE AN UPFRONT ANSWER BASED ON MY EXPERIENCE IN BOTH SIDES OF THE INDUSTRY. IF YOU PROVIDE ME WITH A HONEST VERSION OF EVENTS, I PROMISE A CANDID AND HONEST ANSWER IN RETURN. I CANNOT ADDRESS ALL CLAIM SCENERIOS DUE TO DIFFERING STATE LAWS AND REGULATIONS, BUT WILL DO MY BEST. PLEASE REMEMBER THAT AN HONEST ANSWER MAY BE ONE THAT YOU DON'T LIKE SO IF THAT IS GOING TO BE A PROBLEM, PLEASE DON'T ASK THE QUESTION. LASTLY, I DO NOT ACCEPT RATINGS AS I DON'T DO THIS FOR RATINGS AND WISH TO SPEAK FREELY.

Experience

20 years in automotive industry, Currently in insurance claims, worked actively as technician and shop owner until about 10 years ago. Current ASE Master Auto Tech and I-Car Platinum Collision Certifications, B.S. Criminal Justice and 10 year auto insurance/extended warranty background

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