Drivers in Pennsylvania are legally obligated to carry Pennsylvania car insurance to drive their vehicle on public roadways. While you are required to carry Personal Liability coverage, you are not required to carry Physical Damage protection unless your vehicle is currently leased or financed. If your vehicle is leased or financed, the lessor or lender that services your loan will require you to list them as a “Loss Payee” on the policy. This is for the lender’s protection and can cause some issues when you file a claim for damage to your vehicle. When your vehicle is totaled in a loss, you need to understand the process of receiving a claims payment. Once you understand this, you can handle the issue correctly so you do not run into any hiccups.
What is a Total Loss?
If your insurer tells you that your car has been deemed a total loss, it is important to understand just what this means. An insurance company will pay to either repair or replace a vehicle minus the deductible on the policy. If you receive estimates for repairs and the cost of repair is more than the market value at the time, your car will be deemed a total loss by the insurer. The insurer will cut you a check for the market value of the vehicle plus any additions you have made to the vehicle. You can either accept the check and sign over the car to the insurance company or opt to keep the vehicle.
What Happens If You Still Owe Money On Your Vehicle?
The process may sound simple up until now. The complications come when you owe money on your vehicle that has been deemed a total loss. As previously stated, you must list your lender as a loss payee on the vehicle. This means that when you are issued a check for the vehicle, the check will be made payable to both you and the finance company.
When checks are made payable to both parties each party must sign the check before the bank will pay. You should take the check to your lender, ask for the loan balance, and have the lender sign before you do. This will give you more power to collect on the money that is due to you because the lender needs your signature first and you will know if you have received an over payment.
You only are obligated to give the finance company the balance of the loan. If the check is more than that you will receive the remainder. If the check is lower than the loan balance, you will have to pay the lender out-of-pocket. You might want check to see if you purchased gap insurance from the lender. If you did, the gap insurance will pay the balance due to the lender for you.
Dealing with an auto insurance claim is never fun, especially if you are not familiar with the process. Make sure you understand how to handle the claim and never pay the lender more than you owe.
How Can You Protect Yourself?
Many insurers offer a “gap” protection or “lease/loan coverage” that is an extra coverage to offset the balance you may still owe at the time your car is totalled. Many times this coverage adds an extra $20-50 a year to your premium. This is much cheaper than the coverager the car dealer will try to get you to purchase at the time of the sale. Hopefully you’ve researched this issue prior to buying directly from the car dealership. Using an independant agent to research your Pennsylvania car insurance coverage, discounts and options may save you a considerable amount in the longrun.