Many car owners learn too late that gap insurance doesn’t always work the way it should. If your provider denied a gap insurance claim, our attorneys can exercise your rights under the law to cover your losses. We represent clients throughout Georgia in claims involving gap coverage, property damage, and diminished value.
What Is Gap Insurance?
“GAP” stands for “guaranteed asset protection,” which is sometimes known as a “gap waiver.” Gap insurance is an optional insurance coverage for newer cars. It is normally added on to your existing collision insurance policy.
Gap insurance covers the difference between what you still owe on your car and how much the car is actually worth if you are involved in an accident and your car is considered a total loss.
How Does Gap Insurance Work?
Your insurance company doesn’t care how much you owe on your auto loan – they will never pay out more than the car is actually worth.
Gap insurance works by making sure you don’t end up paying more for a totaled car than it’s worth. Your car loses a tremendous amount of value as soon as you drive it off the lot. The dealerships, lenders, and insurers know this. That is why gap insurance is often a part of a car loan. Chances are you paid for your policy upfront, and it was tacked onto your loan.
If you are in an accident and your car is totaled, your car insurance policy will cover the vehicle up to the Blue Book value, regardless of what you owe on it. Your gap waiver will cover the rest.
Example of Gap Insurance at Work
Say that you finance a vehicle with a total loan amount of $40,000. Once you drive it off of the lot, the value of your vehicle immediately decreases. Your car may now only be worth $32,000, but your loan will still be $40,000.
If you are involved in a car wreck and your car is a total loss, your insurance will only pay the $32,000 that the car is actually worth. Without gap insurance, you will be responsible for paying back the $8,000 balance on your loan.
What Does Gap Insurance Cover?
Gap insurance covers the difference between what you owe on your car and what the insurance companies will give you if it is totaled. A car accident is one way this could happen, but it’s not the only way your vehicle could become a total loss.
Some other reasons your car might become permanently unsafe or inoperable include:
- Acts of terrorism
- Acts of vandalism
- Auto theft
- Tornado damage
- Hurricane damage
- Earthquake damage
- Flood damage
So what doesn’t gap insurance cover? Basically, it doesn’t cover anything your regular car insurance policy does, such as car rentals or towing. It is not an extended warranty, and it won’t help you if you lose your job or become disabled.
Can Gap Insurance Deny a Claim?
Some car buyers feel that gap insurance is worth the cost because they believe they will be covered when they need it, only to find out later that they were wrong. Gap coverage providers can and do deny claims, and it could happen to you.
Buyer beware: in Georgia, gap waivers are exempt from state’s insurance laws. Companies offering gap coverage can decide how to regulate it. If you believe you’ve been treated unfairly, you may not have the same remedies available to you that you would with your auto insurance coverage.
If you’re having difficulty with a gap coverage claim, talk to our lawyers about your options.
Can I Sue for Gap Insurance Coverage?
You can sue a gap insurance provider, and many do. Just like any other insurance company, a gap insurer may use certain tricks to try to get out of paying you. For example, they may deny they ever received a contract from the lien holder in the first place.
What Kind of Lawyer Do I Need for a Gap Insurance Claim?
Unlike most other car accident lawyers, Kaine Law will represent you in property damage-only and gap coverage claims, even if you weren’t injured in your accident.
Of course, if you were hurt in your accident, we can represent you in bodily injury claims or lawsuits as well.
Should I Buy Gap Insurance?
Your car loses value the moment you drive it off of the lot. Some vehicles are known to lose as much as 30% within the first few months of purchase. By the second year, the value of most cars depreciates by 20%.
For many drivers, a standard insurance policy provides enough protection to cover the cost of repairs or replacement if their car is damaged, totaled, or stolen.
However, if you own a new vehicle, if your car is declared a total loss after an accident, your car and the car’s actual cash value is lower than the amount you owe on your loan, that difference, or “gap,” will not be covered by insurance. The insurance company is only required to pay the fair market value or the actual cash value of your vehicle, not the balance of your loan.
When to Purchase Gap Insurance
You may want to consider purchasing gap insurance if:
- You are buying or leasing a new or slightly used vehicle of significant value.
- If you plan on taking out a long-term auto loan. Chances are you’ll end up “upside down” on the value of your car.
- You are financing a new or used vehicle without a large down payment, creating a “gap” between your vehicle’s actual value and your loan amount.
- You think you would have trouble coming up with the funds to cover the “gap” in case of an accident.
Keep in mind that gap insurance policies are typically only needed for the first few years of your auto loan. Eventually, your car will match the market rate and you’ll earn some equity on your vehicle.
So here’s a tip if you’re considering purchasing Gap insurance for your new vehicle:
Look outside of the car dealer! Most people think that the car dealer is the only source, but you may actually be able to find better rates by shopping around. Credit unions, banks and your own insurance company may also offer this service at a lower price.
Kaine Law Can Help with Your Gap Insurance Claim
Kaine Law advises Georgia clients on issues relating to gap auto insurance and related concerns. To schedule an appointment with a knowledgeable attorney, call us at (404) 214-2001. Our offices are located in Atlanta, Conyers, Lawrenceville, and Stockbridge. Hablamos Español.