Who gets the total loss check?
If your vehicle is financed then you will need to determine the pay-off to the finance company. The liability insurance company must pay the finance company. They are required to do this by law because the finance company has a lien on the vehicle and title. If there is any money left over after the pay-off, the insurance company will write you a check for the difference. Sometimes the check from the insurance company will have your name and the name of the finance company on it. You may have to sign it over to the finance company. The finance company will pay off the loan and refund the difference, if any, to you as your equity in the vehicle.
If the pay-off on the loan is greater than the check from the insurance company then the finance company gets the entire check and you may still owe the difference unless you had purchased “gap” insurance. (Gap insurance is insurance you purchase when you buy the vehicle. It is sometimes required by lessors for leased vehicles and sometimes provided in financed purchases. Another type of optional insurance you might have purchased is “repair or replacement” coverage. This coverage provides that if your vehicle is damaged, your automobile insurance company will pay either the reasonable cost of repairs or the cost of a new auto, whichever is less). If there is insufficient money to pay-off the loan and you do not have any supplemental insurance, you may be able to use substitution of collateral to get another vehicle and continue making loan payments. Generally, if you are “upside down” on a vehicle (in other words, you owe more than it is worth) you would normally be at a standstill. If this situation arises, you can ask the dealer where you purchased your vehicle if he would be willing to do a substitution of collateral where you simply substitute the new vehicle for the original damaged vehicle on the same loan.
In a substitution of collateral, the insurance company sends the check for the FMV to the finance company, which in turn sends the Title to the liability insurance company and transfers what you owe on your vehicle to a new loan on another vehicle selected by you and the dealer. This procedure allows you to settle the property damage claim as well as provide you with a replacement vehicle. Moreover, usually you will not be required to make another down payment on the subsequent vehicle. You will usually be required to purchase the subsequent vehicle from the same dealer because they must agree to this procedure.
If your vehicle is not financed, then the liability insurance company will write you a check for the total loss.