Gap Insurance

by Wendy

I was at fault in an accident. The repair company thinks the car may be totaled. I have Gap Insurance and I don't know what this covers?

Can you help?

I had a Lincoln LS 2004 model with clean interior, clean exterior, no damage, new tire,excellent service record. And I had the custom maple(?) panels put in rather than the interior panels which came with the car.


Answer:

Wendy, I moved your question here because it is a very good question.

Gap insurance cover your car loan only. It is a different kind of insurance. If your car is a total loss, and let's say that the insurance company will pay $10,000 for Actual Cash Value of the car. Let's also say that you owe $15,000 in your car loan. You would be "up side down" in your loan by $5,000. You would still have to pay that difference, even though the insurance company did no pay $15,000.

The solution is Gap Insurance. In the example outlined above, the Gap Insurance company will cover the gap between what the insurance company paid ($10,000) and what you owe ($15,000). In that case the $5,000.

You have to have collision coverage in your police. Collision is the only coverage that would protect you if you are at fault and you hit another car. Double check your insurance policy and check to see if you have this coverage.


Good luck,

Hector.