What Happens if You Crash a Financed Car with Insurance 

Car accidents are a standard possibility on the road. But crashing a financed car can lead to many problems. Here’s what you need to know about handling any damage to your financed car after an accident.
What Happens if You Crash a Financed Car with Insurance 
What Happens if You Crash a Financed Car with Insurance 
Do you know how to handle a car accident if your car loan payment is still pending and your car is damaged in a crash? Let's understand how to deal with an accident if your financed car is damaged. 
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Are you still paying for your car’s installments? Do you know how to handle a car accident if your car loan payment is still pending and your car is damaged in a crash? Car accidents are a standard possibility on the road. But crashing a financed car can lead to many problems. 

Insurance coverage in case of accidents depends on many factors, such as the extent of damage, type of insurance, and much more. In this article, you will learn about what happens if you crash a financed car with insurance and how to deal with it.

What Happens if You Crash a Financed Car with Insurance

What Happens if you Crash a Financed Car with Insurance

When you crash a financed car with insurance, the exact scenario depends on the severity of the damage and your specific insurance coverage.

Here’s a breakdown of the main possibilities:

Car is repairable:

  • Collision coverage: Your insurance kicks in to cover the repair costs up to your policy limits. You may face a deductible, which you’ll need to pay out of pocket.
  • Loan continues: You remain responsible for making your car loan payments while the car is being repaired.

Car is declared a total loss:

  • Insurance payout: Your insurance company will pay you the current market value of the car (called Actual Cash Value, ACV), minus any deductible.
  • Loan payoff: The insurance payout typically goes directly to your lender to pay off the remaining loan balance.
  • Gap coverage: If your outstanding loan balance is higher than the ACV, and you have gap insurance, it will cover the difference. Otherwise, you’ll be responsible for paying the remaining balance yourself.
  • Title transfer: You’ll likely need to sign the car’s title over to the insurance company.

Every car insurance claim is different and depends on the specific details of the claimant’s situation. If a financed car needs repairs, you are usually responsible for the cost. Due to your responsibility as the registered keeper, you are generally responsible for insuring and maintaining the car.

For this reason, finding suitable insurance to cover any potential repairs is vital. Insurance companies will typically cover the cost of repairing your vehicle if you are involved in an accident that wasn’t your fault.

Under the circumstances, an insurance company may repay the car’s value before it is wrecked. This insurance payout may cover the remainder of the car finance balance.

Are You Still Responsible for Your Loan After Crashing a Financed Car?

Crashing a car you financed still means you are responsible for paying the remainder of the loan. In such a situation, this could mean paying for body shop repairs or paying off the car accident loan and replacing the vehicle.

Generally, banks require all buyers of financed cars to have full coverage auto insurance. No matter what the circumstances are of the accident, you will likely have some form of coverage.

When you accept a payout, the insurance company sends a check to the bank or financing company for your remaining balance or the policy maximum. The company will send you any remaining funds, which may be applied to purchasing your next car as a down payment. 

What Happens if You Get into a Car Accident and Haven’t Paid Off Your Car?

After an accident, what will happen depends on your insurance policy. Insurance companies pay only if the insurer is at fault or there is a third-party insurance. For example, your insurance covers damage if you are at fault for the accident. 

A GAP insurance policy covers the difference between the fair market value of the vehicle and the amount owed on the loan. In cases where there is still a significant amount owed on a financed vehicle, GAP car insurance can be beneficial. In some circumstances, an accident may result in a “total loss” of the vehicle. 

Total loss refers to a vehicle whose value exceeds its cost to repair or fix. You may be required to continue paying off your loan or finance agreement even if your car is determined to be a total loss. Depending on the damage to the car and the balance of your loan or agreement, the next step you must take after an accident will vary.

What About Other Damages in a Car Accident?

Some collisions only result in property damage. There is also a possibility of injury. People injured in a crash have additional expenses and losses to consider. During a crash, states like Florida provide specific guidance on how to recover injury-related damages.

As a result, the victim suffers more severe injuries and requires additional compensation for their losses. In some circumstances, reckless or careless drivers can be sued in a fault-based lawsuit, which can help them recover compensation, including:

  • Pain and suffering 
  • Medical bills, current and future
  • Income losses
  • Reduced capacity to work or earn
  • Property damages
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Aniket Kulkarni

A seasoned Product Manager specializing in car insurance content, Aniket has a passion for simplifying complex insurance concepts. His strategic approach to content development reflects years of experience in the product development industry, coupled with a commitment to providing accurate, reliable information.


This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

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