Editor's note: This article first appeared on Insurance.comand is reprinted here with their permission. Click here for the original post.

I totaled my car last week. I found out I owe more thanit's worth. Will my auto insurance provider pay off the whole loanor just the car's value? How do I get money toward a replacementcar?

Your car insurance company will pay only actual cash value (ACV)for your vehicle. That is the fair market value of your vehicle theinstant before it was damaged in the auto accident.

Auto insurance providers never pay more than the value of thevehicle when it is deemed a total loss. (See “Understand your options for a totaledcar.“)

Your collision deductible will be deducted from the actual cashvalue. Say you owe $20,000 and your vehicle is found to be worth$15,000 at the time of the accident and you have a $1,000deductible. Your car insurance company would pay out $14,000 foryour totaled vehicle.

The money wouldn't come directly to you because your car isfinanced. It could go straight to the bank. Or, the check would bemade out to you and your lender for you to sign and send it on toyour finance company.

In the above scenario, you'd still end up owing your lender$6,000. This money will need to come from you—unless you have gapinsurance. (See “Buy gap insurance for your new car?)

Gap insurance is wise to have if you're upside down on your carloan (owe more than the car is worth), because it will pay thedifference between the actual cash value of your vehicle and whatis still owed on your car. Some gap insurance policies will evencover your collision deductible.

(Photo: Shutterstock.com)

Insurance fixes your car, not your finances

Unfortunately, even if you do have gap insurance to cover therest of your loan amount, you won't be left with money to puttoward a replacement car.

To have money to put down on a replacement car, you would haveneeded to owe less than your loan amount. If you had, then youwould have received the money remaining after the lender was paidoff. Or had owned the car outright, all of the money would havecome to you to put toward a new car.

But your insurance company isn't obligated to buy you anothercar, just to pay you the pre-accident value of your old one.

If you can't put a hefty down payment toward the new car,consider a gap policy essential. You'll been burned oncealready.

When you do get a replacement vehicle, compare car insurance rates with multipleauto insurance providers to find who will offer you the best rates.With this accident on your record, you could save hundreds, ormore, by shopping around and finding the insurer that doesn't rateas severely for an accident on your record.

Additional reading

How much car insurance do you need?

What is an SR-22 and how much does it cost?

Does my 10-year-old car need full coverage?