Do I Still Have to Pay Off My Car Loan If It Was Totaled?

Every year, traffic accidents claim the lives of 1.35 million people around the...

the engine of a car

Every year, traffic accidents claim the lives of 1.35 million people around the world. Additionally, there are millions more non-fatal accidents, annually. In the United States, only 0.3% of the country’s 10 million annual accidents involve fatalities.

Many vehicles are destroyed in car accidents or as a result of a crash. If you’re still making payments, many factors determine whether you will have to pay off the remaining loan amount of your totaled car.



The location of your accident may be a factor. For example, Canada and the U.S. have a reciprocal insurance law. This means U.S. insurers cover Americans on tourist visas in Canada, but this does not apply if an American is involved in a car accident in Mexico. Only supplemental insurance plans cover American vehicles in automobile accidents where the scene of the accident is in Mexico.

Replacement Cost Insurance


Your insurance plan will play a key role in determining whether or not you have to pay off your loan on a totaled car. If you purchase a newer vehicle, you have the option of acquiring replacement cost insurance, also known as new-for-old car replacement insurance. Car replacement insurance is additional coverage that you must add to your comprehensive insurance plan. Regular insurance will reimburse you for your car’s estimated value, but this may be lower than the amount owed due to depreciation. Car replacement insurance protects your financial investment and enables you to get a new car that is the same make and model as your previous vehicle. If the vehicle is no longer being manufactured, insurance companies will offer a comparable substitute for your next vehicle or provide a cash settlement.

Guaranteed Asset Protection Insurance


Guaranteed asset protection (GAP) insurance will also ensure your existing loan is covered. If the amount of compensation you receive for your vehicle is less than your existing loan, GAP will pay the difference owed.

Loan Protection Insurance

Loan protection insurance, also known as payment protection insurance (PPI), is an insurance plan you acquire to protect yourself from paying bills if you are injured, ill, or unemployed. If you have PPI, your insurance will cover approved bills. Your coverage duration will depend on the type of PPI insurance you take out, and some policies have a waiting period before you become eligible for bill coverage.


If you were not at fault for your accident, you might be eligible to make a personal injury claim. Regardless of if you are in Los Angeles or Miami car accident lawyers are on hand to discuss your case. Personal injury attorneys understand all the variables that can affect your potential claim. Car accident lawyers offer free consultations and will guide you through the entire process of filing claims after your accident.

Personal injury attorneys can help you file for short or long-term disability claims, negotiate repayment of medical costs, and help you navigate your insurance claims. One critical consideration when you’ve been in an accident is establishing who was at fault. In the U.S., the law requires you to notify the police of any accident that results in an injury. Each state also sets minimum damage amounts for contacting police. If your vehicle sustained more than dents or scrapes, you must call the police and ensure a police report is filed.

Replacing Your Vehicle

Once your existing loan is repaid, you can take out another loan and purchase a new vehicle. There are several low rate car loans you can consider. Loan comparison tools enable you to review the interest rates, down payment requirements, loan duration, and monthly payments that each lender offers. Using a loan comparison tool, you can be confident you have found the best financing available for your new vehicle.

If you still owe money on your vehicle and need to purchase a replacement, you may be able to negotiate a new loan that incorporates your existing debt with the purchase price of a new car.

Other Costs


Although you may receive insurance and settlement payments that cover the debt owed on your totaled vehicle, it may take several months to receive your money. Consequently, you may need to make several payments before the debt is resolved. If you do not have car rental coverage, you may also need to pay for a replacement vehicle while your insurance claims are being processed, and you might not receive compensation for those costs, so keep these in mind.

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