Any time you purchase an auto insurance policy, the broker will most likely offer you gap insurance. You may wonder, as many consumers do, whether this is really necessary or if it is just an attempt to upsell and get more money out of you. The insurance lawyers at Shamis & Gentile explain what gap insurance is and whether you really need it.
What is gap insurance?
Gap insurance is a supplement to your car insurance cover, and it is designed to cover the difference between the insured value of the car and the balance of the loan or lease for which the owner is still liable at the time of an accident. If you total your car or it is stolen before you have paid it off, gap cover will cover any difference between the amount paid out to you by your comprehensive insurance cover and the amount you still owe on your vehicle loan. The benefits of gap insurance are most apparent in cases where the value of a vehicle is lower than the amount still outstanding on the vehicle loan. Otherwise, it is probably not necessary.
The Difference Between Gap Insurance and Full Coverage
The comprehensive cover you take on your car will cover the cash value of the vehicle in the event of theft or if the car is totaled. It will not necessarily cover the full amount that you owe to the bank which financed your car. Gap insurance is intended to make up that shortfall, so it is a financial product that you buy as an addition to your full coverage.
Do You Need Gap Insurance?
The truth is that some car owners can benefit from having gap insurance, while others shouldn’t bother with it. Gap insurance is for situations where the vehicle is worth less than the current outstanding value of the loan that was taken out to buy it. It is thus a good idea to consider buying gap cover if the following conditions apply to you:
- You made a down payment of less than 20% on the purchase of your car.
- The loan term is longer than 60 months.
- You have leased the vehicle
- Your vehicle is one that depreciates more quickly than the average
On the other hand, you can probably ignore the offer of gap insurance if your down payment was higher than 20%, you are paying off the car in less than five years, or you are in the lucky position of owning a vehicle that holds its value better than most.
Shamis & Gentile provides outstanding legal services in Florida and New York. We distinguish ourselves because of our experience and resources. When you bring your case to Shamis & Gentile, you will always work with an insurance lawyer who has an excellent track record. We are progressive and trusted within the legal community, and we are often called upon to settle cases that other law firms may not be able to handle on their own. If you need more advice on vehicle insurance or think you have a case against an insurance company or third party after an auto accident, contact us now and book an appointment with one of our lawyers.