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When you lease a vehicle, how you deal with the insurance company is different than if you were financing a car when involved in a motor vehicle crash. You must notify your insurer and the leasing company if you’ve been injured in a car accident with a leased vehicle.
You could be responsible for covering the remaining payments you owe whether the vehicle has been totaled.
It is a common assumption that when the cost of repairing a vehicle is more than its fair market value, it is considered totaled. However, an insurance company will only total a vehicle if the repair costs are so much that fixing it is not worth the price.
Generally, this is assessed by calculating the value of the cost of the necessary repairs. If the value of the repairs is more than 65% of the car’s worth, the insurance company is more likely to consider the vehicle totaled. For this reason, even if the damage to the car is less than the value of your lease, the insurance company may still consider the vehicle totaled.
After totaling a leased vehicle, you may be unsure of your next steps. However, even if you total your vehicle, you will be required to make any outstanding payments owed. You do not own the vehicle you are driving when you lease. It is like renting a car with more extended than average leasing periods. Approximately 30% of all vehicles are being leased across the nation.
When your vehicle is totaled, the company that owns the car, also known as the leasing company, is interested in getting the vehicle repaired so they can minimize their financial losses. To do this, leasing companies will require full auto insurance coverage before finalizing your lease agreement. Generally, the types of insurance coverage required by leasing companies include:
In leasing a vehicle, you agree to return the car to the leasing company in “serviceable condition.” Ultimately, if the vehicle winds up totaled, you can expect the leasing company to demand you continue paying on your lease agreement through the end of the lease term.
Alabama is a fault state for auto insurance purposes. A claim should be filed with the liable party’s insurer when you are involved in an accident. For this reason, it is essential to be sure to purchase sufficient coverage to protect yourself in the event you are responsible for causing an accident.
Alabama has strict auto insurance requirements in place, including:
Alabama does not require you to purchase comprehensive, collision, gap insurance, rental car coverage, glass coverage, or higher bodily injury liability or property damage liability limits.
However, increasing the amount of coverage you have can only protect you financially in the event of an accident. Fortunately, when you have a leased vehicle, you should have the coverage you need to protect yourself.
When leasing a vehicle, you make monthly payments to the leasing company. If the leased car is totaled, you will still need to be prepared to pay out the remainder of your lease agreement. Gap insurance coverage is designed to cover the remaining amount of your lease when your vehicle is totaled. This way, you are not stuck footing the bill when you potentially owe thousands of dollars in lease payments.
For example, if you still owed $30,000 on your lease agreement but were involved in a motorcycle accident that totaled your vehicle, if only $25,000 of insurance coverage is available, you would still be expected to pay $5,000 to the leasing company. Your gap insurance coverage would cover that $5,000, so you would not have to tap into your savings.
If you are not responsible for causing the accident, you should not be stuck covering the costs. Even if your lease has been totaled, you still need to continue making payments until your gap insurance kicks in. However, you can also file a claim against the liable party so you can cover every loss.
Not only do you have a chance to file a claim with the liable party’s insurance company, but any losses the insurance company does not cover can be sought after in a civil lawsuit. Here, you have the greatest opportunity to recover the compensation you will need for not only cover your remaining lease payments but the cost of starting a new lease, extra insurance coverage costs, other out-of-pocket costs, your medical bills, and all the non-economic damages you experienced as well.
If your lease has been totaled, you may be able to avoid financial distress by getting your remaining payments covered through your gap insurance.
However, if you do not have gap insurance or the insurance company is giving you a hard time, you may need the legal guidance and support of an experienced Alabama car accident lawyer at Belt, Bruner & Barnett P.C.
Schedule your free consultation as soon as today. You can reach us through our convenient contact form or by phone at (205) 933-1500 to get started on your insurance and civil claims.