Who Gets The Insurance Check When A Car Is Totaled?

Posted January 26, 2024 | Personal Injury Blog

“Your car is totaled.” Often, a sinking feeling accompanies those words. If you have been in a car accident, you may be feeling deeply stressed as you struggle to deal with the aftermath. Adding to your frustration, the insurance company may declare your vehicle “totaled or “a “total loss.”

Once your car has been totaled, the insurers may issue a check for monetary compensation. When this happens, important questions arise.

Who receives the insurance check? Will you be directly paid if you are the car’s owner? What if multiple parties were involved in the accident? And how can you protect your financial interests if the car was leased, under loan, or finance? Keep reading to find out.

How Insurance Companies Decide If a Car Is Totaled

When a car is in a serious accident, its damage is often extensive and could even be beyond repair. Occasionally, a totaled vehicle is still drivable, but the needed repairs and restoration are too costly.

When the cost of repairs exceeds your vehicle’s actual cash value (ACV) at the time of an accident, the insurance company may deem the vehicle a total loss, which means it is not worth repairing. They may also “total” your vehicle if the needed repairs exceed your state’s total loss threshold or if it cannot be restored to a safe condition.

Most states have laws regarding total losses and how they are determined. For example, if repair costs exceed 100 percent of the vehicle’s ACV in Texas, insurers must declare it a total loss.

To determine a vehicle’s ACV, insurance companies may consider:

• The age of the car
• Mileage
• Condition
• Pre-existing damage to the vehicle
• Expert opinions
• Sales data for similar cars

Additionally, insurers only pay damages up to the limits of your policy, so the type of insurance coverage you have may impact whether or not you get an insurance check for your totaled car. Your coverage limits also influence how much money you can receive.

Insurance Coverage Can Help You Receive a Payment After Your Car Is Totaled

To receive a check from the insurance company, you must hold a sufficient policy when an accident happens. If you do not have any or adequate coverage, you could be forced to pay expenses out of pocket.

Comprehensive insurance, collision coverage, and GAP insurance can help alleviate financial burdens after an auto accident, which is especially helpful if the totaled car is financed or under loan. For instance, consider the following ways these policies can help you.

Comprehensive and collision coverage

A collision policy is intended to help pay for vehicle damage caused by a collision with another vehicle or object. Thus, such a policy can cover repair costs beyond your deductible – or compensation up to your car’s current value.

Comprehensive coverage protects against non-collision incidents like theft, vandalism, or natural disasters. With this coverage, you may be reimbursed if your car is damaged beyond repair, regardless of fault. Your repair costs may even be covered beyond your deductible so you don’t have to pay the whole bill yourself.

Most lienholders require both collision and comprehensive coverage to safeguard their interest in the vehicle.

GAP insurance

Guaranteed Auto Protection, or GAP insurance, covers the difference between what you owe on your car loan and your vehicle’s ACV. In other words, with GAP insurance, any remaining balance on your loan after deducting the ACV may be covered.

Most policies have deductibles that you must meet. If the damage repair cost does not surpass your deductible, you may not receive a check from the insurance company.

The Status of the Car Determines Who Gets the Insurance Payment

A vehicle’s status plays a significant role in determining who receives the insurance payment. Consider the following information, outlining how your car’s loan, lease, or finance status can affect the insurance payout:

• When a car is financed: If the totaled car was financed and GAP insurance was in place, the payment goes directly to your lienholder. Some finance companies may have specific requirements regarding how they want GAP claims handled. You could be responsible for paying out-of-pocket expenses if you do not have GAP coverage.
• When the vehicle is leased: What if you had a lease agreement on the totaled car? In a lease situation, you do not own the vehicle; the leasing company owns the car. They are interested in ensuring their investment is protected. Thus, in most cases, the insurance payout will go directly to the owner to cover any outstanding payments on the lease. Some leases may include GAP coverage, which covers any remaining balance between what your insurance pays and what you owe on the lease.
• When a totaled car is under a loan: If your vehicle was under a loan when it was totaled, the lienholder has a legal claim to any proceeds from an insurance settlement due to their financial stake in the vehicle. Because of this, the insurance company may pay the lienholder directly. Once that party receives their portion of the settlement, any remaining funds can be released to you. Alternatively, the insurance check may be issued to both you and the lienholder.

Liability Determines Who Is Eligible for an Insurance Payout

Sharing fault in a car accident with another driver can make it difficult to determine who gets the insurance check. In this situation, the insurance company may investigate the percentage of fault shared by each party involved. 

Once fault is determined, the insurance payout will likely be divided accordingly. Of course, the payment amount may depend on your policy limits.

Additionally, many states have laws governing how multi-party collisions should be handled. For example, under Texas law, each party’s level of fault determines the amount you receive after a crash. However, if you are more than 50 percent liable, you cannot recover compensation and will not receive a check from the insurance company.

If you are not liable for the accident, your insurance company will seek reimbursement from the other driver’s insurer. Once your own provider receives payment, they can reimburse you for any out-of-pocket expenses or other damages incurred due to the accident.

Remember, even if you have a valid claim on your hands, you must file the insurance claim or lawsuit within your state’s or policy’s legal time limits. Otherwise, you will be ineligible to receive a check or pursue a lawsuit. So do not delay – seek the help of an experienced auto accident lawyer right away.

Fielding Law Is Ready to Help When Your Car Has Been Totaled

After your car is totaled in a wreck, you may feel overwhelmed, especially if you struggle to get the insurance companies to pay you what you deserve. If the insurance company has underpaid you, delayed payment, or denied your claim, contact the caring auto accident attorneys of Fielding Law today.

At Fielding Law, our seasoned lawyers understand the complexities of car accident claims, and we know how to handle insurance companies. We are not afraid to advocate for your rights. When you hire us, we will work diligently to hold the responsible parties accountable and seek the financial compensation you need.

If you received an insurance check but the payment amount is insufficient, our experienced car accident attorneys can contest the insurer’s decision. We can negotiate for a proper financial payout to cover your losses or pursue a lawsuit if negotiations fail.

After a totaled car collision, don’t settle for less than you may be entitled to receive. Contact Fielding Law today at (877) 880-4090 or fill out our online contact form to schedule a free consultation to discuss your legal options.

Text edited by Mitchell Fielding, a personal injury lawyer and partner at Fielding Law. Mitchell is known for his hard work ethic, friendly personality and dedication to the law. You can find out personal injury law offices in Taylorsville, UT and Mesquite, TX.