What is GAP insurance?
GAP Insurance stands for Guaranteed Asset Protection Insurance.
This is insurance that can be purchased at the time you buy an automobile. which provides you with protection in the event your vehicle is totaled out in an accident. It pays any additional difference that is owed between the actual cash value of the vehicle and the balance of your loan.
This is important coverage to consider when buying a vehicle since most vehicles depreciate in value faster than the loan is paid off. New cars lose value the moment they are driven off of the sales lot, 20-30% in the first year.
Why should I have GAP insurance?
When you are in an accident and your vehicle is totaled, insurance companies value your vehicle on the actual cash value, or market value, at the time of the loss.
Insurance companies only owe what the market value of your vehicle is, not what the loan payoff amount is.
Based on the financing arrangements you made when you purchased your vehicle, the amount owed and the value of your vehicle can be very different.
In order for your gap insurance to pay the difference in full, you must make sure that you receive the full market value of your vehicle from the settlement with the insurance company.
If you accept an amount lower than the market value, GAP may not pay the difference and only payoff any amount over market value leaving you responsible for the difference. It should also be noted that if you are behind on payments and or have interest penalties on your loan, GAP will not pay those amounts.
Carr and Carr Attorneys
At Carr and Carr Attorneys we have professionals that understand how GAP insurance works and can assist you in not only making sure you receive the correct value of your vehicle but also with the GAP insurance claim.