Gap Coverage for Property Damage: Bridging the Debt Divide

The Dilemma: Property Damage

Car accidents can have devastating physical, emotional, and economic consequences. Even those individuals who are fortunate enough to avoid serious bodily injuries are still often left with complex property damage issues, which they need help resolving. The first issue is how much compensation the plaintiff will receive for their damaged vehicle. Vehicles which have sustained so much damage that repairs would cost more than the actual cash value of the vehicle are considered a total loss. In the event a plaintiff’s vehicle is designated a total loss, he or she is entitled to the actual cash value of the vehicle. One area of potential financial calamity is when an individual has a vehicle with loan to value ratio higher than the vehicles actual cash value. This means the individual actually owes more on their vehicle’s car loan than the vehicle is worth. This logic also applies to individuals who lease a vehicle for a prolonged period of time.

According to Edmunds.com the average new vehicle depreciates, or loses value, around 11 percent as soon as the new owner exits the dealer’s lot. This depreciation continues, with the average new vehicle losing as much as 20% of its value in the first year. Imagine this stark scenario. An owner of a new vehicle places $1,000.00 down on said vehicle and then finances another $25,000.00 to make the purchase. The new owner cruises off the lot and is hit from behind by a vehicle, totaling their “brand new” car. If the actual cash value of the car after leaving the lot is $22,250.00 (on par with the national average) then the new vehicle owner may already be in the negative. The insurance company will only cover the actual cash value of $22,250.00 which leaves the remaining amount owed on the $25,000.00 car loan squarely the responsibility of the vehicle owner to pay. The vehicle owner could have avoided this entire scenario by having GAP insurance.

Gap Insurance Defined

GAP Insurance stands for “guaranteed auto protection” and is often referred to as “GAP Coverage”. GAP insurance coverage generally covers the excess vehicle loan amount in the event that the vehicle is totaled and the compensation does not satisfy the total outstanding loan. GAP coverage is essentially a financial safety net protecting consumers who have long term loans, and/or have put down low down payments in relation to their vehicle’s value. GAP Insurance is available from most insurance companies as well as the finance institution where the loan was obtained. The car dealership where a party obtains their vehicle should explain all GAP coverage available as a courtesy. The specifics of any GAP insurance policy are in the contract terms and should be thoroughly read by any party obtaining coverage.

Here at Rob Levine and Associates we understand how vital it is to have your property damage claim resolved as soon as possible, in order to get you back on the road. Transportation is a necessity in today’s world and most of us can’t afford to be without a car for extended periods of time. Our firm understands how vital coverage like GAP insurance can be and we will fight to have the insurance carrier honor this coverage if you obtained it. The only way to truly help a person resolve their property damage claim is to understand the coverage available to them.