Most people have heard the term “GAP insurance” and may have been told that they don’t need to get it when purchasing a vehicle. You may have been told that GAP insurance is something the car dealership is offering you just to make a little more money. But before you decline it, let’s go over a few things.
What is GAP Insurance?:
GAP insurance is an optional insurance you can purchase when you buy a new vehicle. It is often offered to you at the dealership along with things like extended warranties when you are filling out the sales paperwork and/or applying for a car loan.
In the event of the loss of your vehicle (typically as a result of a wreck), GAP insurance covers the difference between what you owe on the vehicle and what the auto insurance company is paying.
GAP Can Be Extremely Helpful After a Total Loss:
As stated above, GAP insurance comes into play if your car is totaled and your car loan is more than the amount the car insurance company is paying you for it. Say for example you total your vehicle in a car accident a year after purchasing it and at that time, you still owe $20,000 on your loan. Since your car started to depreciate as soon as you rolled off the lot, it may only be worth $15,000. After the car insurance company pays the loan company $15,000, you still owe $5,000. If you have GAP, your GAP insurer will pay the $5,000 difference on your note.
In the scenario above, if you didn’t have GAP, you would be stuck owing the $5,000 difference. That’s because, in Louisiana, the law only requires the at-fault insurance company to pay the Actual Cash Value “ACV” of your vehicle after a total loss. The ACV and the amount you may owe on your car note are TWO SEPARATE THINGS. In short, the at-fault car insurance company doesn’t care how much you owe on your vehicle.
When Don’t I Need GAP?:
You likely don’t need GAP insurance when the Actual Cash Value of your vehicle is more than what you owe on it. If you are uncertain about this, or if the amount you owe on the vehicle is close to its current value, you may want to consider GAP.
Oh Shoot! I Don’t Have GAP. Can I Still Get It?:
Good news! Even if you originally declined GAP insurance when you purchased your vehicle, you can probably add it if you still have a car loan and your vehicle hasn’t been wrecked. You can call your original dealer to see if GAP is still available through them, or you can call your own auto insurance company to see if they offer GAP as an optional coverage on your insurance policy.
Have You Been Injured In An Accident And Have Questions About How Your GAP Insurance Works?
If you have been injuried in a car wreck and have questions about how your GAP insurance works contact us online or call our Covington office directly at 985.590.6182 to schedule your free consultation today. Flattmann Law serves clients on the Northshore, including Covington, Mandeville, Abita Springs, Bogalusa, Franklinton, Folsom, Madisonville, Goodbee, Hammond, Lacombe, Pearl River, and Slidell.