What happens with the lien holder in an accident?

If you have a new vehicle you make payments on in South Carolina, whoever holds your loan has a lien on your title. This means you cannot sell or otherwise get rid of the vehicle without paying off the loan. If you have an accident and your insurance declares your vehicle a total loss, what happens with the lien holder?

According to the Foundation Insurance Group, if you end up in a situation where the cost of repairs to your vehicle is more than about 80 percent of the value of the vehicle, then your insurance company will likely declare it a total loss. This means they pay you for the value of the vehicle based on the Kelley Blue Book value.

If your insurance company does this, you will get a check for the value of your vehicle instead of having the vehicle repaired. The check will have your name and the name of the lien holder because you must pay the lien holder out of the check.

If you owe more than your coverage pays, you still owe the remainder of the loan. So, you would have to give the lien holder the whole insurance payment and finish making payments on the loan. This is common because vehicles go down in value over time. You may have the option of gap insurance which will give you extra insurance to ensure you receive the whole amount of your loan if you experience a total loss. This information is for education and is not legal advice.