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Perhaps you have wondered what will happen after the total loss has been declared for your car if you have not yet finished paying the loan for it. This is one of the biggest doubts that have arisen in the Secretariat of Mexican Mobility and in the respective insurers, because both owners and advisors on the subject question about how to proceed before an event of these.
When you open a car, the last thing you want is to have an accident, start thinking if the insurer has to pay for the total loss for your car, ask yourself if this money will be given to you or if you will be left with a damaged car and a current debt is the fear of many, think about the possibility that even without finishing paying, you should answer for the car, continue paying the fees normally and not be able to enjoy it.
Here we explain better what happens in these cases and how you should proceed.
What is the total loss of a vehicle and how is it calculated?
Each insurer or car insurance company has its own internal rules to determine if a car really was “total loss” after an accident. Generally when the damages exceed a certain percentage of the value of the car, these companies declare the vehicle as a total loss, more or less the range that these insurers drive is 80% of the value of the car.
To better understand all this, let’s say your car was worth 18,000 pesos on the day of the accident (this figure is determined by the insurance company), then applying the 80% rule, the insurer will verify with qualified personnel if the damages exceed 14,400 pesos Mexicans (which is 80% of 18,000), if the repair costs are lower, the car is probably not a total loss and the company will proceed to authorize the necessary repairs.
In the event that repairing the car exceeds 14,400 Mexican pesos this will be declared as a total loss, thus, some repairs will not be authorized and instead the insurance company will issue a check for the value of the car on the day of the accident, in This case will be 18,000 pesos that you will receive.
Now, let’s see what interests us.
What happens if my car is paid for my total loss and I have not finished paying it yet?
With the previous example we were very clear about the amount that we are going to receive from the insurance company, this check will have your name as beneficiary, however, it will also have the name of any bank or company that has lent you for the car purchase
It is indispensable and obligatory that the companies include the owner of the entity that lent you the money to guarantee that this is destined to the payment of any loan that is had on the car, this ensures that the bank with which you have the business receives the payment of the debt first than any other person (you), the rest of the money if it were left over of course would be for you.
So far everything is clear, we already know how much the car insurer should pay us, but I think that a question cannot be left unanswered:
What happens if the payment of the insurance company does not cover the total debt of the loan?
I think we all know that cars tend to depreciate their value as time goes by, this will make the value that the insurer pays less than the debt you have with the entity that lent you the money, this because the values of the Cars are dictated by the open market, and is determined by the mileage and physical condition and operation of the car.
If this is the case and the insurance company disbursed a smaller amount than the loan, you are legally obliged to continue making your monthly payments to the bank or financial lender that you used to acquire the car until paying the entire debt. That your car has been left as a total loss does not change the terms in your loan payment contract.
If you have extra insurance or ‘lack’ this could cover the difference between the amount of the insurance check and the loan. To know if you have this type of policy in force you should contact an insurance agent.
Having clarified many aspects about the total loss for your car, the way they pay you and how you should respond to a bank if it is the case, you have a great tool to develop in case you someday go through a similar situation, We hope not, but you already have a firm basis to act in any case.