What Is Gap Insurance?
Gap insurance is special insurance coverage for people who lease or finance their vehicles. When you buy a car or truck, especially a new one, it starts to depreciate in value the moment you drive it off the lot. If you get into an accident while you’re still paying off your vehicle or driving a leased vehicle, you could owe more than the market value of the car due to depreciation and interest. Gap insurance covers the difference.
Understanding Depreciation and Interest
To better understand gap insurance, we can look an example. Say you bought a new car with a $30,000 loan from the dealer. Although the car is worth $30,000 when you take it off the lot, every mile you drive makes the car less valuable – your car can lose 20 to 30% of its value in one year. At the same time, interest increases the “gap” between your loan and what the car is worth.
If you get into an accident that totals or badly damages your car while you have $20,000 left on your loan, the value of the car may actually be closer to $18,000. Your insurance company or an at-fault driver’s insurance company might only cover the market value of your car – $18,000 – but you will still owe $2,000 for a car you no longer have. If you have gap insurance, your policy will close this gap, which means you will not owe the dealer any money for a totaled car.
Where Can I Buy Gap Insurance?
Most car dealers offer gap insurance as an option while you are financing your vehicle. You can also purchase gap insurance from your regular auto insurance provider. On average, gap insurance with collision and comprehensive coverage only adds about $20 to your annual premium.
What If My Insurer Refuses to Pay?
Despite their advertisements, insurance companies are more interested in their profits than your wellbeing. If you get into a serious car accident, and the insurance company is responsible for medical bills, missed wages, and property damage, your insurer may be reluctant to pay out gap coverage, as well.
Sometimes, insurance companies deny valid claims for no reason at all.
If you need help recovering after a car accident or getting the coverage you paid for from an insurance company, do not hesitate to contact us today. One of our attorneys will be in touch shortly.
For more immediate assistance, you can also call us at (918) 347-6456 – we will never charge any legal fees unless we recover compensation on your behalf.