You're in a car accident and it's not your fault. Your car is totaled. The at-fault driver's insurance company is going to pay 100% of the costs of your vehicle, right?
Your car is stolen and you report it to the police. Your insurance company is going to pay 100% of the costs of your vehicle, right?
The answer to both of these questions is WRONG. The comprehensive and collision coverage required in the State of Connecticut only covers the fair market value (actual cash value) of your vehicle. When you get into an accident, you may find out that the fair market value of your vehicle is a lot less than what you thought. Research shows that the value of your vehicle depreciates by 11% when you drive it off of the dealer's lot and up to 25% per year!
GAP coverage stands for "Guaranteed Auto Protection." This coverage is NOT INCLUDED in your standard auto policy. GAP coverage protects you from paying out what can be a significant difference between the amount you owe on your car loan and the actual cash value of your vehicle.
Let's say you buy a used car. The purchase price is $12,000. You put $2,000 down and take out a car loan for $10,000. Your monthly car loan payment is $200. Three months later, your car is totaled. You made three payments of $200 each, so your loan balance is $9,400. The fair market value of your car on the date of the accident is $5,000 and this is the amount the insurance company pays you. You are now left with a $4,400 car loan you must continue to make payments on and no car. You probably also don't have any money to put down for a new car.
GAP insurance coverage would pay for the $4,400 deficit so that you do not have to come up with this money out of pocket.
You should be sure to have GAP coverage on new, used or leased vehicles. When you take out any type of car loan, keep in mind that the larger the loan the more important GAP insurance becomes. When purchasing or leasing a vehicle, be sure to ask the dealer about GAP coverage. If you did not elect to purchase GAP coverage when you bought your car, call your dealer or auto insurance provider immediately to be sure you are protected.
If you or someone you love was injured in a motor vehicle accident in Connecticut, you should contact an attorney right away. The Law Offices of Mark E. Salomone & Morelli has experience handling property damage claims and will deal with the insurance company on your behalf so you can focus on getting better. Contact us today for a free consultation at 1-800-WIN-WIN-1.