When individuals purchase collision coverage for their vehicles, they're often under the mistaken impression that it fully covers their vehicles if totaled in an accident.
However, this isn't necessarily true, especially if you financed your car purchase—which the majority of people do. To protect yourself more fully, you may want to purchase optional GAP insurance, which stands for Guaranteed Auto Protection.
Why You May Need GAP Insurance
Whenever you purchase a vehicle and drive it off the lot, it depreciates rather than appreciates in value.
If your car is totaled in a crash and you have collision insurance, your carrier will pay you the actual cash value of your vehicle.
This is what the negligent driver’s insurance company would pay, too—most likely less than the purchase price, and less than what you owe on your auto loan. The insurance company would issue payment for the car’s value to the lender that financed your loan.
However, you still owe a balance on your car loan, and have no money for a new vehicle. This is where GAP insurance can help. It pays the difference between what the insurance company compensates you for the vehicle's value and what you owe on the auto loan.
You should consider purchasing this additional coverage in these situations:
- You paid less than $2,000 in a down payment when purchasing the vehicle.
- You're leasing a vehicle.
- You financed a vehicle loan over a long period of time.
If you're leasing a vehicle, lease GAP insurance is a variation of traditional GAP insurance that pays the difference between what you owe under the agreement and the vehicle’s actual cash value.
You can often purchase GAP policies from your auto insurance carrier.
Were you or a loved one involved in a car accident? Our experienced car accident attorneys are ready to answer your questions and pursue your claim for compensation. To get started, contact us online or call our office directly at 816.471.5111 to schedule your free consultation.