When a car is totaled and the other driver was at fault, does their insurer settle with me or only with my insurance company?
Question Details: My car was hit and totaled on private property. The other driver was determined by their insurance company to be at fault. My insurer valued my car for less than what I still owed on car and I have filed a GAP claim for the remainder. What I don't get or understand is why I am out of a car. The insurance company gets paid for whatever they paid out for my totaled car from the other insurance company and all I get to due is go out and get back in debt for another car with the finance company for someone else's negligence.
The problem you have is that, leaving your GAP insurance out of it for the moment, in terms of valuing compensation for destroyed property, like a "totalled" car, the law looks to its then-current fair marke value, NOT what you paid for it. The reason it does that is price is all over the place and will lead to inequitable or unfair results. For example, if the law looked to price paid, if you received a car as a gift from a family member (which is not uncommon), then the person destroying your car or their insurer would not have to pay anything, since the car's owner paid nothing for it. Or some people are better negotiators than others--should someone who is good at negotiating the price of a car down get less money when it is totalled than someone who is bad at negotiating, since the bad negotiator would have paid more? Etc.
Also, the current value really is what it is worth now--it's what someone would have paid for it. A car you paid $20k for 5 years ago is simply not worth $20k anymore, so if you were compensated based on its price, you'd receive an unfair windfall: you would have in essence driven for free for 5 years, since you were compensated based on its original price, not what it's worth after 5 years of driving.
Therefore, the law looks to value. But due to depreciation, the current value of a car is almost always less than what you paid for it--or, if you financed it (rather than paying cash on the spot), what you still owe on it. That's why you bought your GAP insurance--to make sure you weren't stuck still owing money on a destroyed car. But you are right that it leaves you out a car: unfortunately, insurance does not fully compensate people for the loss of assets which depreciate in value (like cars or electronics, and unlike houses, gold, or artwork) but that is simply the nature of insurance. It doesn't prevent you from suffering from the loss--it just makes the pain less than if you had no insurance.