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What should you consider in determining the value of your car that is being financed? There are two things — the remaining loan amount and the blue book value of your vehicle.

 

The Kelley Blue Book is a standard tool used by insurance companies, dealers, and private sellers to calculate the value of your car; the valuation done is based on the age and the condition of your car.

 

What does “total loss” mean?

 

Generally, if the repair cost is higher than a certain percentage value of your car, the insurance company declares it a total loss. Insurance companies have different guidelines in determining total loss, but on average, the percentage value that they use is 80%. This means that if the value of the repair is less than 80% of the depreciated value of your car, they will authorize the repair. But if not, a check will be sent to you with your name and the name of your lien holder (the name of the finance company or bank where you got your loan for the car) as the payees.

 

Why should the name of the lien holder be on the check? Well, this is a requirement for insurance companies to guarantee that you get to pay your loan outstanding balance because they have the right to be paid out first if we talk about it legally.


Your car insurance is only required to pay the depreciated amount of your vehicle if your car is totaled in an accident and it cannot be repaired. If your car has a loan outstanding balance, you are the one required to pay it.