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Financial institutions typically require you to keep collision and comprehensive insurance for a reason. When you fail to do this, you could be on the hook for a significant amount of money. Furthermore, the bank may require you to pay for the unpaid portion of the vehicle in the event of a total loss. A Palm Beach Gardens car accident lawyer from Lytal, Reiter, Smith, Ivey & Fronrath can guide you through your options and minimize the impact this may have on your life.
Lender insurance requirements and gap insurance
All Florida drivers are required to carry insurance coverage on their vehicles at all times. This is especially important when you have a financed car. Lenders provide specific directions on the minimum coverage required for a financed car in the loan terms. They will generally require liability insurance and comprehensive and collision coverage on vehicles, along with any other coverage they specify, like underinsured and uninsured motorist coverage
Lenders may also offer or require gap insurance. Gap insurance accounts for the depreciating value of the vehicle and the loan amount. It pays the difference between the car’s market value and what is left on the loan if you are in a serious accident. This type of insurance is often used when a vehicle is leased, there is an extended loan term, minimal to no down payment, fast depreciation, or a negative value from a previous loan combined with the current one.
Your financial liability in an accident
If you are driving without insurance, let it lapse, or do not have gap insurance on a loan for which you are upside down, you could be left owing money on the vehicle in the event of a car accident. Determining how much you owe will depend on a few factors.
Generally, when car accidents occur and insured vehicles are damaged, insurance companies will determine the car’s market value and pay the market value of the car. This often resolves the loan on a totaled vehicle. However, when there is no insurance, there is no coverage for the damage to the vehicle and no assistance for the remainder of the loan. In these situations, you will likely still need to continue making loan payments on the car. You could also be subject to fines or legal challenges for driving without insurance.
If you have standard insurance but do not have gap insurance, your policy will cover the car’s market value, but you will have to pay the difference that is left on the loan.
How a car’s value is calculated
Many drivers assume that they will be able to pay off their vehicle and will not get in an accident while they are still paying it off. Even if you are a good driver, no one is immune to a car wreck. Unfortunately, if you are involved in an accident and insurance declares a total loss on your vehicle, you still have a financial obligation to uphold. The amount will depend on the loan balance and the car’s value.
To calculate a vehicle’s value, claims adjusters will use tools like Kelly Blue Book to determine the actual cash value (ACV) of the car. This considers factors such as the vehicle’s age, mileage, general condition, and make and model. Some vehicles retain their value well, while others may see steeper depreciation over time.
Your options after an uninsured accident in a financed car
If you are responsible for causing an accident in an uninsured or financed car, you are likely facing increased liability and limited options. Not only could you be responsible for paying for the other driver’s medical and property damage, but you will also not receive any reimbursement for your own injuries or vehicle repair costs since you did not have coverage. You may find yourself stuck repaying the loan value, along with any fines that may be levied against you.
In these situations, you’ll want to talk with a car accident attorney to learn how to proceed. They will negotiate on your behalf and work to reduce your liability. They may be able to reach an agreement with your lender or the other driver’s insurance company. Your lawyer understands the financial and legal complexities and challenges that come with these situations, and they are prepared to advocate for you.
Speak to Lytal, Reiter, Smith, Ivey & Fronrath Today
Lytal, Reiter, Smith, Ivey & Fronrath protects your rights after an accident and advocates for you with your lender. We understand the impact an uninsured financed car can have on your life, and we work to get you the most favorable outcome possible in your situation. Contact our offices at (561) 655-1990 or online to schedule a free consultation with our team today.