In a lease, the insurance payout goes directly to the leasing company, not to you. Read on to learn more.
When a leased vehicle is declared a total loss after a Houston car crash, it can be confusing to know whether the insurance company is responsible for paying off the car. In Texas, however, the outcome depends on the lease agreement, the insurance policy, and who caused the collision.
After a serious crash, the stakes are often far greater than the value of the vehicle itself. Our trial attorneys have recovered Billions for injury victims and their families, including some of the largest commercial motor vehicle accident verdicts and settlements in history. We understand how large corporations and their insurance companies work to discredit injuries, shift blame, and minimize what they pay. Our team fights to ensure crash victims recover the justice and full compensation they need to rebuild their lives and secure their futures.
Read on to learn what happens when a leased car is totaled in Texas and the steps you can take to protect your rights.
What Does Totaled Mean in Texas?
Under Texas law, a vehicle is considered a total loss when the cost to repair it exceeds its actual cash value. Insurance companies calculate the fair market value of the car just before the crash. If repairs would cost more than that sum, the insurer will typically declare it a total loss and issue a settlement check.
With a leased car, there is an added layer of complexity since you do not own the vehicle. This can complicate who gets the insurance proceeds and whether the vehicle is fully paid off.
Who Gets the Insurance Money?
In a lease, the leasing company is usually listed as the owner and lienholder on the insurance policy. That means the insurance payout goes directly to the leasing company, not to you.
The insurer will determine the actual cash value of the car and send that amount to the leasing company. The leasing company will then apply that payment toward the remaining balance owed under the lease.
The leasing company will close the account once the balance is satisfied, whether through insurance proceeds, GAP coverage, or additional payment from you. You do not continue making monthly lease payments on a vehicle that has been declared a total loss, but you may still have financial obligations if the payout does not fully satisfy the lease terms.
What if You Owe More Than the Car Is Worth?
Leased vehicles, like financed vehicles, can depreciate faster than the balance owed under the lease. If the insurance company’s payment is less than what you still owe on the lease, you may be responsible for the difference.
This gap between the car’s value and the remaining balance is known as “negative equity.” If you don’t have additional insurance policies that cover this amount, you could receive a bill from the leasing company even though the car is destroyed.
Many lease agreements include GAP coverage, which stands for Guaranteed Asset Protection. GAP insurance is designed to cover the difference between the insurance payout and the remaining lease balance. If your lease includes GAP coverage, it can prevent you from having to pay out of pocket after a total loss.
What if Another Driver Was at Fault?
If the crash was caused by someone else, you can pursue a claim against the at-fault driver’s insurance company. In Texas, drivers are required to carry property damage liability insurance to cover damages they cause to other vehicles.
In this situation, the at-fault driver’s insurer may pay the value of your leased vehicle. If their coverage is insufficient, your own uninsured or underinsured motorist coverage may apply.
Importantly, you may also have a claim for additional damages, including:
- Medical expenses
- Lost wages
- Pain and suffering
Your personal injury claim is separate from your property damage claim. You have the right to seek damages for accident-related injuries regardless of whether you own the car.
Contact Zehl & Associates To Schedule a Free Consultation With an Undefeated Houston Personal Injury Lawyer
An experienced Houston car accident attorney can determine whether you have a personal injury claim after a crash in a leased vehicle. Most importantly, your attorney can help you pursue compensation for your financial and personal losses if another driver was responsible for the collision.
If you need help, contact Zehl & Associates today to schedule a free consultation to discuss your personal injury claim.
We proudly serve Harris County, Midland County, and throughout the state of Texas. We are located in Houston and Midland and throughout the state of Texas:
Zehl & Associates Injury & Accident Lawyers – Houston
2700 Post Oak Blvd #1000, Houston, TX 77056
(888) 603-3636
Open 24 hours
Zehl & Associates Injury & Accident Lawyers – Midland
306 W Wall St Suite 701, Midland, TX 79701
(432) 220-0000
Open 24 hours