Reader’s Question:

When I purchased full coverage auto insurance in Gulport Mississippi, my understanding was that if my car was totaled in an accident, that means my car loan would be paid off. I was very disappointed to know from my insurance company that they’re only going to pay my car’s market value after it was totaled. Is that fair?

Stacey

Gulfport, MS

I know that it’s disappointing but in reality your insurer is not obligated to pay you the amount you still owe on your car loan after it was totaled. Just so you know “Full coverage,” or collision and comprehensive insurance, simply mean that your insurance company must give you a check representing the car’s actual cash value. Actual cash value refers to the amount the car was worth before the accident. Therefore, you’re still responsible for the amount outstanding on your car loan.

There is a way for you to cover the difference between the car’s cash value and the amount you owe on the loan and that is to purchase gap insurance. Gap insurance covers you if your car is totaled before you’ve paid off the loan, or before the lease term is expired. It is available to cover auto leases and auto loans. You can contact your Gulfport, Mississippi insurance agent or insurance company for further discussions.

Tags: auto insurance