When you last purchased car insurance, perhaps you saw an option for purchasing gap insurance as well. It is more important for some drivers to carry gap insurance than others. This post explores what gap coverage is, who needs it, and what you can expect if you are involved in an accident and carry gap coverage.
What is gap insurance?
Gap insurance, or as it is sometimes called “gap protection,” covers the difference between what you owe on your car and what your car is worth. Cars depreciate in value over time and, in many instances, depreciate faster that the loan is paid down. This creates a gap between the vehicle’s actual cash value and the amount that you owe.
Gap insurance can make a big difference if your car is stolen or totaled. In the event that your vehicle is totaled and is a covered loss, you can expect that the insurance company will cover only the vehicle’s actual cash value. Without gap insurance, this means that you are still responsible for the difference between the vehicle’s value and the amount of the loan, even though you can no longer drive the car and are likely making payments on a replacement car.
Who needs gap insurance?
If you are “upside down” in your vehicle, meaning that you have negative equity and owe more than the car is worth, you should consider buying gap insurance. Gap insurance is available, although not required, in Georgia. It appears as a separate premium on your insurance statement every month.
Certain owners do not need gap insurance. If you own your car free and clear or owe less than your car is worth, you do not need gap insurance because there is no gap to insure. A comprehensive collision plan will still pay you the actual cash value of your vehicle in the event of a covered total loss. For this reason, if you carry gap insurance, you may wish to periodically reevaluate by checking your current loan balance against your car’s value.
If you have been involved in a vehicle collision, do not try to navigate the insurance system alone. Georgia personal injury attorney Frank Harris is here to help. Call our office now at (678) 483-8655 or visit our website to learn more about the firm.