If you are involved in a serious car accident and your car is deemed a total loss, this in and of itself is stressful. You may have sustained
personal injuries, you may be missing time from work and on top of all that, your car has been destroyed. Not to worry you think, the insurance company will pay for my totaled car, I'll buy another car and everything will be fine. This is often the feeling many of our clients convey to us after having been involved in a car accident. While this may seem like a very simple concept, issues can arise when the value of your car is less than what is owed to a bank. For instance, let's assume that you bought a car and borrowed $10,000.00 to purchase the car one year ago. The balance on this loan at the time of the car accident is $8,000.00. However, the value of your car is only $7,000.00. This is a situation where the insurance company would issue a check for $7,000.00 and you would be required to pay your bank the remaining $1,000.00 to fully satisfy your loan obligation. So after the accident, you are $1,000.00 out of pocket and you have no car and most likely no money to purchase a replacement vehicle.
There is a very simple and inexpensive solution to this problem and that is to purchase GAP insurance. GAP insurance can be purchased when you purchase your vehicle and is often times incorporated into a bank loan. GAP insurance pays the difference between what a car is worth and what is owed to the bank. In the above-referenced scenario, if GAP insurance had been purchased, the insurance company would pay what the car is worth ($7,000.00) and the GAP insurance would pay the bank the difference in what the car is worth ($7,000.00) and what is owed on the car ($8,000.00) or in this example, $1,000.00. GAP insurance is a very important coverage that can be purchased at very little cost; however, it can deliver huge dividends if you find yourself in an "upside down" situation with your car after you have been involved in a car accident. If you have been in a car accident and need assistance navigating through all of the insurance company mazes, contact one of our experienced attorneys at Layman Law Firm, P.L.