Stuart F. Cubbon, Esq.
GAP INSURANCE: IF YOU HAVE A CAR LOAN YOU NEED IT!
What’s better than a new car? New car smell. Shiny body. Purrs like a kitten! But we all know that as soon as you drive it off the lot, it is worth less than you paid for it and that depreciation continues. That’s okay, you still have a solid and dependable car.
If you have a loan on that solid dependable car, though, you may well now owe more than the car is worth and that situation may exist for the length of the loan—four—five–six years.
Unfortunately if you are in an accident that renders your car a total loss while you have that loan, you’ll only receive the depreciated value of your car and NOT whatever you owe. For example, assume you took a $12,000 loan on your car and it was totaled nine months later when you still owed $11,000. If it turns out that the car was only worth $9,000, you are going to have to cough up another $2000 to pay off the loan! There is a GAP between the what you receive and what you owe. (This may even be larger if you have to deal with a deductible of $500 or $1000.)
Fortunately, your insurance carrier can provide you GAP insurance coverage that will pay the difference. You’re still out a car, but the loan is paid off and you have nothing out of pocket.
More good news! GAP INSURANCE is cheap. It adds pennies to the cost of your insurance but provides a huge benefit in the case of a total loss, regardless of who is at fault.
If you have a car loan, you need GAP insurance! Contact your insurance carrier to discuss this and feel free to contact our office to review as well.