We have all probably heard “your car loses value as soon as you drive off the dealership lot,” right? Well, it is very true, and typically it is because of the financing deal when you buy a new car. Due to the interest and financing charges involved in purchasing a new vehicle, most people end up immediately upside down in their vehicle value.
GAP Insurance covers the “gap” between the current value of your vehicle and the amount you still owe on it. For example, let’s say the current value of your vehicle is $20,000.00, but you owe the bank $25,000.00… the GAP insurance would cover that $5,000.00 difference if needed.
Why does this matter? Having this type of coverage is beneficial if your vehicle is ever stolen or if you are involved in an accident and your vehicle is a total loss. Even if the accident is not your fault, the insurance company is only required to pay you the current market value of your vehicle, not the financed amount that you may still owe to the bank. Imagine being in an accident that was not your fault, losing your vehicle, and still having to make payments on a car you don’t have. Sadly, in my years working in personal injury, I have seen this happen more times than you would guess. It definitely adds frustration and aggravation to an already difficult situation. Now, there are a few ways that an attorney can help the client get more value added to the vehicle in order to try to get the full amount that they owe, but it may not always be sufficient.
So, how can you protect yourself and acquire this coverage? This type of insurance is usually offered by the dealership and can even be negotiated into the purchase price of the vehicle or financing deal. But also, most people do not know that it is available to purchase through your auto insurance company. Some companies have different names for it, such as “return to value” or “vehicle replacement,” but its purpose and function is the same. The average cost of adding GAP coverage to your policy will run you about $20-$40 per month.
If you have any questions about GAP insurance, would like us to review your policy, or have been in an accident and need help, we are more than happy to assist you.