In a total loss claim on a vehicle does the insurance co have to pay the finance company first instead of paying the car owner?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Oct 14, 2019

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Insurance Question from Olivette, MO

Asked on 10/14/2019

In a total loss claim on a vehicle does the insurance co have to pay the finance company first instead of paying the car owner? The insurance company accepts full responsibility of accident. They deemed it a total loss are they obligated or is there a law that states they have to pay the finance company off instead of the owner of the vehicle.

Answer given on October 15, 2019

If a vehicle is considered a total loss by an insurance company, and they have accepted responsibility for the damage and the policy has a loss payee listing the finance company for a loan on the vehicle, the insurance company does have to make the payment to the finance company.  Many insurance companies will list both the loss payee and the insured on the insurance policy on the settlement check, to be sure that both entities are properly represented. The amount of the actual cash value of the car may not be sufficient to pay off the loan on the car. If that is the case, the insured will owe the difference to the finance company.

If there is any payment for a rental car, bodily injury to the occupant of the vehicle, that would be payable directly to the named insured on the policy, or the injured person. They will also sometimes make payment directly to the rental car company, unless the insured person has already paid the rental car company.


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