What Is Gap Insurance and What Does It Cover?

What is gap insurance and what does it cover Read on to learn more about gap insurance, who needs it, and what it covers after an auto accident

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What Is Gap Insurance and What Does It Cover?

Gap auto insurance is a form of policy that protects an owner of the vehicle financially by paying benefits if the driver actually pays more on an auto loan than the vehicle’s depreciated value after it is stolen or totaled. Depending on the case, it might be appropriate to buy gap car insurance in California. Read on to know more about gap insurance, and if you have any unanswered concerns about how gap insurance works after a crash, contact an experienced Los Angeles car accident lawyer.
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What Does Gap Insurance Pay For?

When you are involved in an accident that results in the complete loss of your automobile, if you have collision or comprehensive insurance, the regular auto insurance policy will protect the entire pre-crash value of your vehicle. If you were not at fault for the collision, the other driver’s property liability responsibility should cover the expenses up to the policy’s limit.
For eg, a vehicle costing $10,000 prior to the crash can generate $10,000 in collateral loss to repair the totaled vehicle, as long as the overall benefits exceed this amount. Your regular car insurance policy, on the other hand, would not cover the outstanding payments on the vehicle loan prior to the accident.
Gap insurance, when combined with accident and/or comprehensive insurance, will help offset the remaining balance on a wrecked or stolen car, up to the vehicle’s depreciated value. Gap insurance covers the difference between the value of the vehicle at the time of the crash (which regular insurance would cover) and the balance remaining on a lease or loan contract.
For instance, suppose you buy a car for $20,000 and then owe $15,000 on it after it is totaled. If the vehicle’s depreciated value is below $10,000, regular insurance will pay you $10,000 to repair it. However, you will also be responsible for the remaining $5,000 on the initial loan.
Gap insurance covers the difference between the amount covered by regular auto insurance and the balance remaining on the lease or loan. It can save you thousands of dollars in debt to your car loan lender after a major car crash or auto theft. It fills the void, preventing you from having to pay the difference out of pocket.
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Who Needs Gap Insurance?

In California, gap insurance is an optional form of policy. State law mandates that you hold $15,000 in bodily injury liability coverage per person, $30,000 in bodily injury liability coverage per crash, and $5,000 in property loss liability coverage. If you buy a brand-new car, the auto loan insurer will request you to obtain extra accident or comprehensive insurance. When you cause a traffic crash, this insurance will compensate you for the value of your vehicle, up to the policy’s limit. In certain instances, you may also wish to purchase gap insurance.
You made a significant down payment or none at all to the car dealer. In the first year after you drive your car off the lot, it will lose 20% to 25% of its original worth. A low down payment means you’re almost certainly upside down on your debt – particularly if you bought a car with a high depreciation rate.
You’re repaying a long-term debt that was financed for at least 60 months. Long-term car loans find it impossible to accumulate equity in the vehicle, committing you to liabilities in the event of a collision. If you rolled over negative equity into your new loan, you might want to consider gap protection as well. Your car is leased. The majority of vehicle loan contracts require you to have gap insurance. Even if gap protection is not required by the lease deal, you may choose to buy it to cover yourself financially in the event of auto theft or other property loss.
On the day you buy your new vehicle, you will be eligible to purchase gap auto insurance from the dealer. The majority of car insurance providers often sell gap insurance, usually at a lower rate than retailers. Typically, this form of cover contributes about $20 to annual auto insurance rates. Consult the dealer or car finance broker for more details about your insurance requirements.

Fair Cases Law Group, Personal Injury Lawyers
5411 S. Broadway Ave, Suite 200,
Los Angeles CA 90037
833-324-7111
www.faircases.com

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