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No sensible person would take out a loan on an automobile and then smash that same car into a tree, all within weeks of having bought the ultimately smashed vehicle. Yet, no reckless driver thinks about the loan that might have been used to purchase a vehicle that has gotten into the same driver’s way.

Why would an insurance company declare a damaged vehicle to be a total loss?

Personal Injury Lawyer in Halifax knows that company would look at the cost of any needed repairs, and see how that cost compared with the car’s market value. If the costs for repairs exceeded the size of the car’s market value, then the insurance company would declare the damaged vehicle to be a total loss.

If an insured vehicle has been declared a total loss, then the insurer does not offer to cover any repairs. Instead the insurer studies the damaged vehicle’s mileage and condition. After noting those features, the insurance company decides on the damaged vehicle’s value.

Based on its assessment of the damaged car, the insurance company writes a check, one that equals the size of the damaged vehicle’s market value. There are 2 names on that check: The name of the insured person and the car’s lien holder. The lien holder has the right to get paid first, from the money that was delivered to the policy holder/claimant.

3 possible scenarios

The recipient of the check gives one part of the available funds to the lien holder; the remainder gets saved, in anticipation of using it to buy a new automobile. This scenario gets played out in situations where the insured driver owes only a limited amount of money to the lien holder.

All of the money in the check must be paid to the lien holder. Still, even after that payment has been made, the loan has not been paid off. Consequently, the person that took out the loan must continue making payments, while having no access to the purchased vehicle.

The person that used the loaned money to buy a car also invested in gap coverage, as a part of his or her insurance policy. A policy holder that has paid for gap coverage has every reason to expect his or her insurance company to pay the difference between the amount of the check and the amount of money owed to the lien holder.

The common element in each of the above scenarios:

In each case, the person that owes money to the lien holder receives his or her check within a limited amount of time. That would not be the case, if the drier of the insured car chose to challenge the value that the insurer placed on the badly-damaged vehicle.