Do you have Gap Insurance for your vehicle? Many times consumers have no idea what Gap Insurance is or why they may need to purchase this important coverage when buying a vehicle.
Essentially, Gap Insurance covers the difference (the gap) between what your vehicle is worth and how much you owe on the car. Gap Insurance comes into play if your car is stolen or totaled (damaged to the point that repair would cost more than the car is worth) and the loan balance exceeds the value of the car.
Why is Gap Insurance So Important?
Unfortunately, many of our clients experience a situation where they are involved in an accident and their car is not repairable and declared a total loss. Once this occurs, the insurance company is required to pay them fair market value for their vehicle—or what would it cost them to go out on the market and buy a similar vehicle.
It’s important to note the fair market value of the vehicle has nothing to do with what you might owe on your car loan. If the agreed upon value is less than the payoff on any loan or lease, then you would still be personally responsible to pay off the balance of the loan. When this happens, not only do you no longer have a car, but you still have to pay car payments. No one wants to be in this situation and this is why purchasing gap coverage is extremely important.
Who Should Buy Gap Insurance?
For anyone buying or leasing a vehicle, Gap Insurance is highly recommended in the following circumstances:
- If you made a low down payment
- If you bought a car that depreciates rapidly
- If you have a high-interest rate or if you rolled over other costs into your new car payments (such as money you still owed on a car you traded for another)
- If you are leasing a vehicle for a significant amount of time
- If you are leasing a vehicle and expect to owe more than the car is worth
When to Buy Gap Insurance?
Gap Insurance is usually offered by the dealership when you purchase the vehicle and is normally at a cost less than $500.00. We highly advise to protect yourself and seriously consider purchasing this insurance, so when an unexpected accident occurs it does not create a financially burden for you.
Our experienced personal injury attorneys at Allen Flatt Ballidis & Leslie provide reliable legal representation you may need to protect your rights and we can advise you whether or not an accident may warrant legal action. We offer a free consultation, so call us at 949-752-7474 to schedule your free consultation today.