Being in a serious car accident is stressful enough without having to worry about what happens to your car loan afterward. Many South Carolina drivers assume their insurance company will pay off the full balance of their loan if the vehicle is declared a total loss. Unfortunately, that is not always the case. Insurance companies typically pay the actual cash value (ACV) of your car, not what you still owe on the loan.
That difference can leave you facing unexpected financial challenges, especially if you are upside down on the loan.
What Does It Mean When a Car Is “Totaled” in South Carolina?
In South Carolina, insurance companies are required to declare a vehicle a total loss if repairs would cost more than 75% of the car’s value. They can also choose to declare a vehicle a total loss even if the repairs are less than 75% of the actual cash value.
For example, if your car was worth $10,000 right before the accident and repairs are estimated at $7,500 or more, the insurance company must declare it totaled. Once a car is deemed a total loss, it usually goes through the salvage title process, meaning the vehicle may no longer be driven unless repaired and rebranded as a salvaged car according to South Carolina law.
What Happens If Your Financed Car Is Totaled in South Carolina?
If you financed your vehicle, your lender technically owns the car until the loan is fully paid. That means the insurance payout goes to the lienholder first. The insurer will issue a check to the lender for the car’s ACV. If that amount is more than your outstanding loan balance, the lender keeps what is owed, and you receive the remainder.
But if the ACV is less than your loan balance, you are still responsible for paying the difference. For example, if you owe $15,000 but your totaled vehicle’s ACV is $12,000, the insurance company pays $12,000 to your lender, and you must cover the remaining $3,000. Unless you have gap insurance, that shortfall will come out of your pocket.
How Insurance Companies Calculate the Actual Cash Value (ACV)
The actual cash value (ACV) is the amount your car was worth immediately before the crash. Insurers consider:
- The car’s make, model, and year.
- Mileage and overall condition.
- Market prices for similar vehicles in your area.
- The cost of recent additions to the vehicle.
- Depreciation over time.
Because ACV usually ends up lower than what you originally paid for the vehicle, many drivers are surprised to find that their settlement doesn’t cover their loan balance. This is why lenders often encourage buyers to purchase GAP insurance when financing a car.
Who Gets Paid First: You or the Lender?
When a financed vehicle is totaled, the insurance company pays the lender first. The lender has a legal claim on the car until the loan is fully paid off.
Only after the lender is paid will you receive any remaining balance from the insurance settlement. If the settlement is less than your loan balance, you are responsible for the difference, unless you have gap insurance.
Can You Keep a Totaled Car in South Carolina?
Yes, you can keep your totaled car in some cases. This is called retaining salvage.
If you choose to keep it, the insurer will deduct the salvage value (what the wrecked car is worth for parts or scrap) from your settlement.
Keep in mind:
- The car will get a salvage title, which limits how it can be sold or driven.
- To drive it again, it must pass repairs and a state inspection.
- For most drivers, keeping a totaled car isn’t practical, but it’s an option if you want to fix it yourself or use it for parts.
What If the Accident Wasn’t Your Fault?
If another driver caused the accident, their liability insurance should cover your losses, including the ACV of your vehicle. However, disputes over value and delays in payment are common.
If the at-fault driver’s insurance isn’t enough to cover your losses, or they don’t have insurance, your own collision coverage or uninsured/underinsured motorist (UM/UIM) coverage may apply. South Carolina law requires drivers to carry at least the minimum liability coverage, as well as uninsured coverage and underinsured coverage (which covers damages over and above the liability limits from the at-fault driver). It is strongly recommended for added protection.
Legal and Financial Considerations After a Total Loss
A totaled car can leave you with unexpected financial stress, especially if you’re still paying off a loan. Some key considerations include:
- Loan balance vs. settlement: Without GAP coverage, you may still owe money even after insurance pays.
- Rental reimbursement: Check whether your policy covers a rental car while you resolve the claim.
- Disputing ACV: If you believe the insurer undervalued your car, you can present evidence of comparable vehicle prices in your area.
- Medical bills and lost wages: If the wreck caused injuries, you may also have claims for compensation beyond property damage.
These financial issues highlight why having legal guidance can make a difference.
How a South Carolina Car Accident Lawyer Can Help
Dealing with insurance companies and lenders after your car is totaled can be overwhelming, especially if you’re also recovering from injuries. A skilled South Carolina car accident attorney can review your policy, challenge lowball actual cash value (ACV) offers, and handle complex communications with insurers and lenders.
If another driver caused the crash, your lawyer can pursue additional compensation, helping ensure you’re not burdened with debt or left paying for someone else’s negligence.
