07/11/2025
You Still Owe the Bank. Even if your car is totally wrecked or underwater, the loan doesn’t magically disappear. Your loan is a separate legal obligation, you borrowed money, and you still owe that amount until it’s fully paid. The bank doesn’t care if the car drowned, burned, or flew away; the contract stays alive.
If your vehicle is under financing, it’s usually required to have Comprehensive Insurance with Acts of Nature (AON) coverage.
Here’s what happens next:
You file the claim for flood damage. The insurance company pays the bank directly (since the car is the collateral). If the claim amount is equal to or higher than your outstanding balance, your loan is considered settled.
If the claim is less than what you owe, you’ll have to pay the remaining balance out of pocket.
Example:
You owe ₱500,000 on the car.
Insurance payout = ₱450,000.
You still need to pay ₱50,000 to the bank.
Bad news: If the insurance won’t pay for flood damage (difference), so the bank will still demand payment for the loan balance.
You’ll either: Keep paying the loan while your car sits totaled, or Try to negotiate a loan restructuring or repossession agreement (so the bank can sell what’s left of the vehicle).
What You Should Do Now
1. Contact your insurance company first, verify if your policy includes Acts of Nature.
2. Notify your bank immediately, tell them about the damage and that you’re filing an insurance claim.
3. Don’t stop paying unless the bank confirms your claim is approved and settlement is in process.
4. Keep all receipts, photos, and reports, the bank will likely ask for proof of loss.
The insurance pays for the damage, but you remain liable for the loan until the bank gets fully paid.If the insurance payout clears your debt, good, loan closed. If not, the remaining balance is still on you.
Dr. Rodel G. Revilla
DBA, MMREM, REC, REA, REB, LPT, PFM
Appraiser l Consultant I Professor
