How Gap Insurance Can Help After a Serious Car Wreck
Many New Jersey drivers operate vehicles that are under lease and car loan agreements rather than being owned outright. In a car accident claim with a totaled vehicle, this can create issues due to the difference in the amount remaining on the lease vs. the actual cash value (ACV) of the vehicle. Gap insurance can help by covering this difference.
What Is Gap Insurance?
Gap insurance – or Guaranteed Asset Protection (GAP) coverage – is a specific type of insurance a driver can pay for to protect against owing money on a lease agreement for a vehicle that is declared a total loss after a major car accident. Gap insurance offers financial coverage if the driver still owes more to a leasing company than the depreciated ACV of the leased car.
Why Is Gap Insurance Recommended for Leased Vehicles?
When a car is “totaled” in a serious accident, this means an insurance company has determined it will cost more to repair the car than the vehicle is worth. In this situation, an insurance claim can lead to a financial settlement that pays the victim the equivalent of the actual cash value of the vehicle prior to the accident.
If the driver of the car had an active automobile loan or vehicle lease, however, the remaining balance may exceed the vehicle’s ACV. This occurs because most vehicles, especially new cars, immediately depreciate in market value when they are driven off the lot. Therefore, there will be a disparity between what the individual owes on a lease/loan agreement and how much the car is actually worth at the time of an accident.
In this unique situation, the driver may find themselves facing personal liability for the difference between what an insurance company offers as the totaled vehicle’s ACV and the amount remaining on an outstanding loan or lease. Purchasing gap insurance is recommended to avoid this potential out-of-pocket cost after a serious crash.
How Does Gap Insurance Work?
Guaranteed asset protection coverage supplies insurance benefits that supplement standard automobile insurance when a total loss occurs to a leased or loaned vehicle. It does not replace a standard New Jersey automobile insurance policy. It adds coverage in the specific situation where a standard policy does not pay what is still owed by the victim on an auto lease or loan.
Gap insurance can cover:
- The difference in the vehicle’s ACV and the remaining lease balance
- A total loss from a car accident or due to theft or vandalism
- Remaining loan or lease balances, up to the policy’s limits
If you get involved in a major accident in a leased vehicle, your gap insurance coverage can protect you from owing money to your loan provider out of pocket. It is especially important to consider purchasing gap insurance if you made a small or no down payment on your vehicle, you have a longer-term car loan, or you purchased a new vehicle. Some leasing companies require gap insurance coverage.
Need Help With a Gap Insurance Claim? Contact an Attorney
Even with all the right types of insurance, you may still find it difficult to recover fair compensation for a car accident involving the total loss of a vehicle with an active lease or loan. This is because insurance companies have a habit of devaluing claims to protect their own profits.
If you need assistance navigating a gap insurance claim in New Jersey, contact a personal injury lawyer. An attorney from the Law Offices of Jeffrey S. Hasson can help you seek fair benefits from all available insurance policies and negotiate with claims adjusters for a fair settlement.