Also serving the communities of De Luz, Rainbow, Camp Pendleton, Pala and Pauma
Morton J. Grabel Attorney-at-Law Special to the Village News
Sometimes after an auto accident and while representing a personal injury client, we find the auto insurance coverage they had does not nearly cover the auto loan pay back or the lease pay back. There is a gap between what is owed and what an insurance will pay if the auto is totaled.
That is usually when the client might recall having heard of something called GAP insurance when they were in the finance office of the auto dealer.
GAP stands for "Guaranteed Auto Protection." GAP insurance is very important when leasing since you don't actually own the car and usually don't put down a large down payment. If you have an accident, your insurance will pay you the current market value of the car, but not the total amount of what you owe the finance company. This leaves a gap in your coverage, an amount that you still have to pay.
Let's say your $30,000 car is totaled in an accident. You still could owe as much as $10,000, after your insurance pays off your finance company.
GAP insurance is important for leasing. However, if you make a small down payment or do a zero down deal when you buy a car, you might also consider a GAP policy. That is because usually the car's depreciation outpaces your monthly car payment.
For example, if you buy a car for $20,000 and put no money down, the car might be worth only $14,000 a year later, even though you still owe $19,000. If an accident totals your car, you will be responsible for paying the $5,000 difference to the lender.
Therefore, GAP insurance for purchases especially with the zero down and a low monthly payment is becoming increasingly important, even though most car buyers have neglected it.
Leasing companies require GAP insurance, so it is usually included in the contract. If GAP coverage is included in the car lease, check to see how much you're paying for it and compare with other insurance companies. Sometimes lease contracts may include a GAP waiver, which protects you from GAP charges in the event the leased vehicle is declared a total loss. That eliminates the need for an actual GAP policy. Therefore, it is very important to read the fine print before you sign on the dotted line.
A few things to keep in mind when buying GAP insurance:
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