If your car is totaled in a car accident, and your vehicle is worth less than you owe on it, the balance will need to be paid. You could potentially owe thousands more than the car is worth. Without the right kind of insurance – GAP insurance – you could end up making payments on a car that you don’t have. Keep reading to learn how GAP insurance could help you after a car accident, and then contact The Law Offices of Larry H. Parker at 800-333-0000 if you require a free legal consultation with an experienced personal injury attorney.
The Basics of GAP Insurance
As mentioned above, the purpose of GAP insurance is to pay the difference between what the insurance company pays for your totaled vehicle and what you currently owe on it. To put it simply, GAP insurance will pay off the loan on your vehicle. Note that it can also be used to cover the difference between value and your loan in the event that your car is stolen.
An Example of the Importance of GAP Insurance
Imagine that you bought a car for $20,000. A few months later, you are involved in a serious car accident, and the vehicle is totaled. After only owning the car a few months, you might not have even made a payment on it. If your loan is still $20,000, but the insurance company values your vehicle at $15,000, then GAP insurance would cover the remaining $5,000 you owe on your loan.
Now imagine that in that situation, you did not have GAP insurance. You would be stuck not only having to buy a new car and all the expenses that come with that but coming up with $5,000 to pay the difference between what was owed and what the insurance company paid.
GAP Insurance is Helpful in Many Situations
There are many situations in which GAP insurance can be very helpful. If you lease your vehicle, have negative equity from a previous loan into your new loan, paid less than 20% down when you bought your car, took out a loan for five or more years, or bought a vehicle that declines faster than normal in value (such as a luxury vehicle).
That said, not everyone benefits from GAP insurance. If you do not have a loan on your vehicle, then you do not need this coverage. If your vehicle is worth $13,000 and you only owe $8,000 on it, then you do not need this coverage.
Call Us if You Are Involved in a Car Accident
If you are involved in a car accident in which someone else is at fault, you should contact a personal injury attorney as soon as possible. We make it easy to do so: just call The Law Offices of Larry H. Parker at 800-333-0000 for a free legal consultation.