Why Gap Insurance is so Important to Have
Imagine this – you have finally reached the point where you are able to purchase a new car. After spending hours at the credit union looking over papers and getting your financial information in order, and signing on numerous dotted lines, you are approved for the amount you need. You go to the dealership, get the keys, and drive away in the car you’ve been dreaming of for the past few years. Then, just days later, you’re involved in an accident that ends up totaling your new car.
If the accident was caused by another driver and you were insured, you will of course expect to get compensation from your insurance company for the cost of your new vehicle. That’s what insurance is for, right? Having insurance coverage is meant to save your bank account when a series of unfortunate events happen.
If you think that as a motorist you will receive a check to cover the cost of your totaled vehicle, you’re right and you’re wrong at the same time.
Paying off a Car after an Accident
If the cost of your car is $20,000, but you have it financed through a loan, you will end up paying more than that amount in the end. The cost of your loan could be, for example, $26,000 including interest.
If you were involved in a car accident soon after you purchase your car, the insurance company would pay you the fair market value of your vehicle. This means that there is a very high probability that you would receive less than the purchase price for the totaled vehicle and the interest on your loan, leaving a gap of money that you’re expected to pay.
Gap Insurance Protects You
The purpose of gap insurance is to make up the difference between the cost of your loan and the fair market value of the vehicle. It protects you from finding yourself in a very difficult situation and ultimately gives you peace of mind.
Gap insurance also protects you in the event that your car is stolen and unrecovered. Instead of the insurance company giving you the actual value of the vehicle, they would cover the difference of the loan as well, so you’re not stuck with a substantial bill to pay and no car to drive.
It is always advised to thoroughly read through your insurance company’s gap insurance coverage so you are fully aware of the protection that you have.
Questions about Gap Insurance
Attorney Charlie Contrada believes that Gap insurance is very important to have if you have a newer vehicle, or if you have interest payments on your car loan. If you do not add this optional insurance coverage to your policy, you could potentially find yourself in a very troubling financial situation.
After helping numerous clients through car accident claims and seeing the problems they face with their insurance coverage, attorney Contrada’s goal is to inform motorists of the options they have when it comes to car insurance coverage. For more information on the different types of car insurance, read this article highlighting the options. If you have a specific question about car insurance coverage after being involved in a car accident, call our office at 419.841.4400 and attorney Contrada will help you understand your options.