, Derry, New Hampshire


May 8, 2014

About the Law: Insurance pays value, not amount owed

I was in an accident when someone ran a stop sign and totaled my car. There’s no question about fault.

After dickering with the insurance company, they will only pay me market value on my car, which is $3,500 less than I owe on the car loan. Can I sue the person that hit me for the balance due on the car loan?

The law and the insurance policies only require payment of actual cash value after a total loss. It’s unfortunate, but true, that many car loans exceed the actual value of the car.

You “can” bring a lawsuit. But, the law and the terms of the insurance policy to be applied by the court will only reimburse for the actual value of the car. So, if your insurer is paying this, and you’ve successfully negotiated the final number, going to court over this issue is a waste of time.

Gap coverage is an auto insurance provision available to make up the difference between the vehicle’s value and the amount of the loan. If your vehicle is a total loss, this insurance pays the difference between what you owe on your loan and your ruined car’s actual cash value. Insurance agents and car dealers should fully explain this option and recommend it because this would bail you out.

It is worth mentioning that many people believe they have what they call “full coverage,” without knowing the provisions and limitations of the actual policy.

I’m thinking about buying my daughter, who is in her 20s, a car. But, what if she commits a crime with the car, or what if she hurts someone while driving it? The car title would be placed in her name, but am I liable if I purchase the car for her?

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