Gap insurance, also known as Guaranteed Asset Protection insurance, is a critical auto insurance add-on that protects vehicle owners from financial losses after a serious accident. Specifically, gap insurance covers the difference between the actual cash value (ACV) of a vehicle and the remaining balance on the car loan or lease if the car is totaled or stolen. Without gap insurance, drivers may be stuck paying out-of-pocket for this "gap," adding financial stress to an already difficult situation.
For drivers involved in accidents that result in a total vehicle loss, gap insurance provides peace of mind by covering financial obligations that standard insurance policies don’t address. This is especially relevant for those who have recently purchased or leased a new vehicle, as cars typically depreciate faster than loan balances are paid off.
While gap insurance doesn’t impact personal injury claims for medical expenses or pain and suffering, it plays an essential role in ensuring accident victims aren’t burdened with extra financial challenges. By eliminating the stress of owing money on a totaled car, gap insurance allows accident victims to focus on their recovery and their legal claims.
Without gap insurance, the driver would owe $5,000 out of pocket, even though they no longer have the vehicle.
No, gap insurance only covers the financial gap between your car’s value and your loan or lease balance. It doesn’t cover medical expenses, lost wages, or personal injury claims.
Drivers who are financing or leasing a car should strongly consider gap insurance, particularly if the vehicle is new or has a high depreciation rate.
By covering financial shortfalls after a car is totaled, gap insurance allows accident victims to avoid financial distress, making it easier to focus on recovering compensation through a personal injury claim.
After an accident, clients may face a mix of financial and legal challenges, including medical bills, lost wages, and disputes with insurance companies.
If you’ve been in an accident and need help navigating the legal process or dealing with insurance companies, a personal injury lawyer can help you better understand your options with gap insurance.