This type of Insurance policy covers the difference between the Fair Market Value of your vehicle, and what you actually owe on the vehicle if your vehicle is totaled in an accident.
When you purchase a new or used car, motorcycle, or other vehicle on credit from a dealer, more often than not you are required to not only purchase Comprehensive and Collision insurance, but you are also required to purchase GAP insurance so that the finance company knows that will be paid in full if the car is totaled in an accident.
Regardless of whether it is required or not, we always recommend purchasing GAP Insurance coverage if you owe a lender money for a car, motorcycle or other vehicle.
You do not want to get stuck paying thousand’s of dollars on a car, motorcycle or other vehicle loan after an accident, if your vehicle has been declared a total loss after an accident. Comprehensive and Collision Insurance coverage only covers up to the fair market value of the car, not what you owe a lender for your vehicle.
We cannot tell you how many times victims of accidents find out the hard way that their insurance company will not pay enough money on a property damage claim, to cover what is owed on the vehicle. Nobody wants to get stuck for thousands of dollars in payments on a vehicle they no longer own, or that is totaled. We recommend getting GAP Insurance on your vehicle if you owe money on the vehicle.
By Norman Gregory Fernandez, Esq. , Copyright 2006
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