If my car was totaled, can I use the insurance that I purchased through the title holder to pay off my loan and keep the money from the other car’s insurer to get a new vehicle?

I have a title loan and also have the additional insurance with the title holder because I only had liability. I was recently in a wreck that was not my fault and my car has been totaled. Can I use the insurance that I purchased through the title holder to pay off the loan and keep the money from the other insurance car to get a new vehicle?

Asked on July 7, 2014 under Accident Law, Texas


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

Regardless of how many policies, from whom, you have, or where else (e.g. another driver's insurance), you are trying to collect from, bear in mind:

1) You cannot get more than the then-current value (the "blue book" value) for a car of that make, model, model year, mileage, and condition, which is almost certainly less than the current loan amount--unless that is, you have a policy which gives you more than that, such as "gap" coverage for the excess of the loan over the current car value.

2) You CANNOT collect twice or double. In other words, assume you don't have gap coverage, so all you can get is the value of the car. Say the value of the car was $15,000. It does not matter if you get that $15,000 from your own insurer, from the other driver, or from the other driver's insurance (or from a combination)--all you are entitled to, no matter how many sources of payment you have, is $15,000.

In another example, say your car is worth $15,000; you have $18,000 in financing still on it; and you do have gap coverage. Your own insurer should give you $18k to pay off the financed amount; then even if the other driver is at fault, you cannot get another $15,000 (the value of the car) from them or their insurer--there is no double-dippping.

2a) Instead, if your insurer (or insurance with the title holder) pays you or pays off your loan, *your insurer* has the right to sue the other driver to recover its pay out. The money goes to it, not you.

3) And, as you evidently know, any payment goes first to your loan; only if there's excess (e.g. the car is worth more than the remaining loan balance) does any come to you.

Of course, if you were personally injured, you can sue the other driver for your personal injuries (e.g. medical costs; lost wages if any; possibly pain and suffering). Or if personal property was also destroyed (e.g. you had a laptop in the car, which was ruined), you could sue or submit (if you have coverage ) a claim for that value in addition to the car's  value.

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