"Why Should I Still Owe the $3,000 On a Totaled Car
For a Collision That Was Not My Fault?"
This is a very common question, and is difficult to explain to upset clients. Under Ohio law, if your car is totaled, you are entitled to the actual cash value of the car.The value of your car MAY OR MAY NOT BE equal to what you owe on it!!! For example, if you take out a 5 year loan on a $10,000 car, and your payments total $13,000 over that time, you are $3,000 “in the hole” when you drive it off the lot. If you get in a collision and total the car before you get home, all any insurance company owes you is the value of the vehicle – and not what you owe on it.
GAP INSURANCE IS THE ANSWER:
You run a big risk of still having to pay for years on a totaled car if you put no money down on it and finance it over a lot of years. One way of protecting yourself is to purchase “Gap Insurance.” It covers you for the difference between what you owe and your actual cash value. In our example above, the gap insurance would have paid off the $3,000 you owed on your loan. Some car dealers sell it, or your auto agent might be able to add it to your policy. Just make sure your gap insurance covers accidents.