The insurance company will give you what is known as actual cash value (ACV) also sometimes referred to as fair market value for your totaled out vehicle. They do not take into account the balance of your loan when deciding what to pay out for a vehicle (unless you have LLG or Gap insurance), just the actual worth of the car in the condition it was in prior to the accident.

It is up to the insurance company working the claim to determine whether a settlement will be offered based on the repair of a damaged vehicle or whether it will be declared a total loss and payment offered based on the actual cash value of the vehicle at the time of the loss.

State laws and insurance guidelines vary however in general if the cost to repair covered damage exceeds 75% of the vehicle’s ACV, the insurance adjuster will declare it a total loss and offer a settlement on that basis. The ACV of a vehicle is determined by considering book values (such as from the Kelley Blue Book or NADA Guide) and a retail market value survey to reflect the sale prices of comparable vehicles in your area usually. In addition, your insurance company may use a computerized evaluation process to assist them in determining the value of your vehicle.

An insurance company will need to be able to document its files to support the position that the offer the company made to settle a claim based on the total loss of a vehicle reflects the retail value of the vehicle at the time of the loss. It does not owe any consideration to a loan balance. If an individual has a loan balance greater than the value of the vehicle that is insured, than what could help cover the difference over the ACV amount is Gap insurance. Gap insurance is designed to provide coverage for the difference between the amount owed and the ACV of the insured vehicle.

So the insurance of the car that broadsided you will likely total out your vehicle since the value of the car appears to be less than the cost to repair the car and thus it would be uneconomical for them to fix your car. They may use resources such as Blue Book values, information on the worth of your car by local dealers and their own computer evaluation system to determine the actual cash value of your vehicle and that is what they will offer you, not the amount you owe on the car.

If the Property Damage Liability settlement for your vehicle is only around $5000 and you still owe $8000 than you would be responsible for the $3000 difference between the ACV and loan balance. If you have Gap insurance it should cover this amount but it not than you would be responsible to keep paying on the car that you no longer have use of unfortunately.