Owning a financed car comes with responsibilities, and one of the biggest concerns is what happens if you get into an accident. Whether it’s a minor fender bender or a total loss, understanding how insurance and finance agreements work can save you from unexpected financial burdens.
Immediate Steps to Take After a Crash
If you crash a financed car, follow these steps to ensure a smooth claims process:
- Check for injuries – Ensure everyone is safe and call emergency services if needed.
- Report the accident – Notify the police and obtain an accident report if required.
- Gather evidence – Take photos, collect witness information, and document the incident.
- Contact your insurance provider – Inform your insurer as soon as possible to begin the claims process.
- Notify your lender – Since the car is still under finance, the lender must be informed.
How Insurance Covers a Financed Car Crash
The type of insurance coverage you have will determine how your financed car is handled after an accident. Here’s how different policies apply:
1. Comprehensive or Collision Cover
If you have a comprehensive or collision insurance policy, your insurer will cover the repair or replacement costs, minus the deductible. Since the car is financed, the payout will go directly to the lender if the car is written off.
2. Third-Party Only Insurance
If you only have third-party insurance, your policy won’t cover the cost of repairing your car. However, it will cover damages to other vehicles or property involved.
3. Gap Insurance (If Applicable)
If your car is declared a total loss, standard insurance may not cover the full amount you owe on the loan. This is where Guaranteed Asset Protection (GAP) insurance helps, covering the difference between the car’s market value and the outstanding loan amount.
Who Pays for the Damage?
| Scenario | Who Pays? |
|---|---|
| Fully insured with collision cover | Insurance covers repairs or lender gets payout for total loss |
| Third-party insurance only | You are responsible for repairs or outstanding finance |
| GAP insurance (total loss) | Covers the shortfall between the insurer’s payout and loan balance |
What If You Still Owe Money After a Total Loss?
If your insurance payout doesn’t fully cover your remaining loan balance and you don’t have GAP insurance, you’ll still be responsible for repaying the outstanding amount to the lender.
Key Takeaways
- Always inform both your insurer and lender after an accident.
- Comprehensive or collision cover protects your car, while third-party insurance only covers others.
- GAP insurance is highly recommended for financed vehicles to cover potential shortfalls.
- If your car is written off and insurance doesn’t cover the full loan amount, you are still responsible for repaying the difference.
Final Thoughts
Having the right insurance coverage is crucial when driving a financed car. Before an accident happens, ensure you understand your policy, consider GAP insurance, and always stay informed about your lender’s requirements. This can save you from unexpected financial stress if the worst happens.
