How Gap Insurance Could Help You After a Car Crash
Posted on behalf of Lynch Law Firm on July 6, 2020 in Car Accident News. Updated on February 24, 2022
If your car is totaled in a car crash, and your car is worth less than the balance of your loan, that balance must be paid. The balance could be anywhere from hundreds to potentially thousands of dollars, and many people do not have that amount of money saved up and ready to bail them out.
This is where gap insurance can be a financial lifeline for car owners. While you may never need this coverage, if you do need it and you do not have it, you will probably be wishing you had purchased it.
Below, the attorneys at Lynch Law Firm explain how gap insurance works and when it could be useful. If you need assistance with your car crash claim, contact us today to schedule a free case review. We collect no upfront fees and we do not charge you for our services unless we win compensation.
What is Gap Insurance and How Does it Work?
Gap insurance pays the difference between the insurance payout for your totaled vehicle and the balance of your loan or lease. In other words, gap insurance pays off the rest of your loan or lease if you owe more on your loan than the value of your totaled car. Gap insurance may also be used if your car is stolen.
Here is a hypothetical situation where gap insurance may apply: If you purchased a car for $20,000 and get into an accident a few months later, you will likely still owe more on your loan than the value of your vehicle. If the insurance company values the vehicle at $18,000, gap insurance should cover the remaining $2,000.
If you do not have gap insurance and you owe more than what the vehicle is worth, you will have to pay the difference out of pocket. Although many car dealerships make purchasing gap insurance optional, you will most likely be required to purchase this coverage when leasing a vehicle.
If you need legal help with your car crash claim, contact a New Jersey car accident lawyer at Lynch Law Firm. Our firm has recovered over $300 million in settlements and verdicts.
Do I Need Gap Insurance?
The Insurance Information Institute says gap insurance could be useful if you:
- Leased your car
- Put negative equity from your last car loan into the new car loan
- Put less than 20 percent down on your car
- Took out a loan that lasts for five years or more
- Bought a car that declines in value faster than other cars (luxury and electric cars tend to decline in value the fastest)
If you are in any of these situations and you do not have gap insurance, this is something you should think about.
How is Gap Insurance Different from Collision and Liability Coverage?
If you cause a car accident, liability insurance helps pay for the other driver’s medical expenses and lost income. This coverage is required by law and may also help pay for your legal fees if you are taken to court for the accident.
New Jersey law requires vehicle owners to purchase the following liability coverage, at minimum:
- Bodily injury liability – $15,000 per person and $30,000 per accident
- Property damage – $5,000 per accident
- Personal injury protection – $15,000 per person, per accident
Collision and comprehensive coverage are optional coverages that pay for damage to your vehicle. Collision pays for damage from a crash with another vehicle or object. Comprehensive pays for damage that is not caused by a collision, such as weather events, theft, vandalism or falling objects.
Learn More About Your Options by Calling a Qualified Lawyer
If you need legal advice after a car crash, the lawyers at Lynch Law Firm are standing by to discuss your claim in a no-cost consultation. You will not be required to make a commitment to our firm, even after your complimentary consultation, and you will not be charged any lawyer fees unless and until we win your case.
Lynch Law Firm. Learn more about how we can help. Phone: (800) 518-0508 .