QuestionI purchased a car at a dealership and got a bank loan to finance it. I was required to get full coverage insurance which I did. I travel out of state a lot and missed one of my insurance payments so I got cancelled. I then got a new insurance policy from a different ins co. I did inform them that there was a lienholder at the time. However, approx six months later I was in an accident and was informed by my insurance co that I did not have full coverage for my vehicle. There is about 8000 owed on the loan and the car is totalled. Is it my responsibility or is it the insurance company who will have to pay off the loan
AnswerDear David,
I am sorry to tell you that it is your job to pay off the loan unless you bought special insurance that covers unpaid balances of loans. This can be purchased separately via another company, but it is rarely done.
Since that is pretty unusual, I am going to assume that like the rest of us, you just bought regular full coverage auto insurance with a collision deductible.
Let's start with some basic understandings. You are the registered owner, but the lienholder is the legal owner. Irrespective of whether or not you ever listed the bank on your insurance, they would never be able to pay off a total on your vehicle and obtain title from you because you did not have the legal title to transfer: only your bank can give title in exchange for payment of the insurance proceeds.
The fact that a lien holder is listed or not listed on the auto insurance policy will not in any way increase the payout if the vehicle is totaled. The payout is based solely upon the actual cash value of the vehicle, not what is owed.
All that is accomplished with the listing of the lienholder is to ensure that the bank gets its name on the check. Not one dollar more above the actual cash value of the vehicle will be paid, irrespective of how much you owed money on the vehicle.
If you elected to have a situation where you owed more than the actual cash value of the vehicle, then that is what is called "being upside down" in a loan: something that should be avoided if possible.
Here, look at it another way: did you think that the auto insurer was signing on to pay off your loan when you listed the lienholder on the policy? How could that be if they did not inquire as to the unpaid balance of the loan? That would make a mess of auto insurance wouldn't it----since the cost of insurance would then change depending upon the debt owed.
Instead, what is done is to agree to fix your vehicle or to pay you the actual cash value if it is totaled. Clean and simple. If you owe more than the actual cash value, then that is your responsibility to take care of.
NOW, how about fighting for the highest actual cash value? Have you already seen the end determination and agreement of the actual cash value between the adjuster and the bank? IF SO, DO NOT AGREE. IT IS NOT UP TO THOSE TWO TO DECIDE THE VALUE OF YOUR VEHICLE.
As registered owner, it is your right to fight for the highest value possible. After all, you are the one who is going to have to pay the deficiency on your loan.
Go to online sources such as autotrader.com and put in for a nationwide search. Remember that these are asking prices. Contact auto dealers for 150 miles around you.
NEW TOPIC: DO YOU WANT TO KEEP THE VEHICLE? Let's say that you do not like the actual cash value offered. You CAN ARRANGE WITH THE BANK to allow you to keep the vehicle and to repair it with USED AND OR NON-ORIGINAL EQUIPMENT MANUFACTURERS PARTS (NON-OEM) depending upon the balance owed on your loan and of course your payment history. This is an item of negotiation with the bank inasmuch as they do not want to see their security lose value. But it is "doable" and it allows the registered owner to continue driving the vehicle and paying on the loan. The only difference is that the repair costs are a lot less because of the used and or NON-OEM parts. So give that some thought.
Best wishes,
Dr. Settlement, J.D. (Juris Doctor)
www.SettlementCentral.Com
