When your car is written off, but not paid off
A wide gap between what the insurer pays and what you still owe the bank can break you financially.
It is any consumer’s nightmare: your car is written off, but not paid off, adding to the stress of being involved in an accident. Hopefully your car is covered by comprehensive insurance, which gives you some peace of mind while dealing with the aftermath of the accident and the steps you must take.
If the damage to the car is extensive, with the repairs costing more than the value of your car, or if the vehicle is considered unsafe as a result of the accident, the insurer can instruct that the car be written off.
“If your vehicle is financed and you are still paying it off when it is written off, you need to contact the financing company and inform them of the situation and discuss what your options are. Technically, the car is still the property of the financier until your insurance company settles the claim and pays the outstanding financing amount still owing on the vehicle,” says Lebogang Gaoaketse, head of marketing and communication at WesBank.
The insurance company will usually be liable to pay the insured amount of the car, minus the applicable excess. Where there is outstanding finance, any payment will first be made to cover the outstanding finance amount. This may cover the exact amount or leave a shortfall, depending on the insured amount and how much you still owe.
What insurance payout depends on
The payout from the insurance company will largely depend on your policy and the excess payment (the amount you must pay upfront when you claim), the amount you still owe to the finance company if your car is financed and the depreciation value on your car due to wear and tear.
Once the insurance company pays the finance company, the written-off car will become the property of the insurance company, irrespective of whether there is an outstanding amount owed to the finance house or not.
“If you still owe an outstanding amount, it must be settled in full immediately. If you are unable to settle the account, we recommend that you enter into a payment arrangement on terms agreed to by both parties depending on your affordability,” Gaoaketse says.
“It is important to understand the legalities under these circumstances to ensure you are aware and informed about who is responsible for settling the debt. Being involved in a car accident is very stressful and the more you know about what to do after the accident and who to contact, the better off you will be when it comes to sorting matters with your insurance company and settling any outstanding debt with the financing house.”
What to do when involved in an accident
Gaoaketse says it is in your best interest to understand all the processes involved following an accident so you can make informed decisions. These include:
- Recording the date, time and location of the accident (take photos on your phone, if you can);
- Noting the make, model and licence plate numbers of all the vehicles involved in the accident;
- Collecting the personal details of all the drivers involved in the accident, including their names, ID numbers and vehicle insurance details, if applicable;
- Checking if there were any witnesses to the accident, including passengers in the affected vehicles and recording their contact details in case there is a dispute regarding liability;
- Reporting the accident at a police station to get a case number for insurance purposes;
- Contacting your insurance company to advise them of the accident and submitting an accident report;
- Once you informed the insurance company, staff will contact you to take you through the next steps.