Purchasing a vehicle is an important decision and major investment. Did you know that if your vehicle were to be totaled or stolen, your insurance company might not pay off the entire loan balance?
In the event of theft or total loss of your vehicle, most insurance companies only pay the cash value of the vehicle at the time of the loss. In today’s automobile market, a vehicle begins to depreciate the minute it is purchased. Because of this, a vehicle’s outstanding loan balance is frequently higher than its actual cash value, especially during the first few years of the loan. Your remaining loan balance could be much greater than the cash value of your vehicle, creating a deficiency that you’re liable for! What is the “GAP” on your vehicle? You may be surprised at the answer!
Would you be able to pay off your loan or continue making monthly loan payments if your vehicle is deemed a total loss by your auto insurance policy and the settlement does not pay off your auto loan?
Here’s how GAP works. Let’s say after one year, the vehicle you purchased for $25,000 is now valued at just $16,000, but you still owe $20,000 when it is involved in an accident and your insurance carrier deems it a Total Loss. Most insurance policies will only reimburse you for the “Actual Cash Value (ACV)” of your vehicle, $16,000 in this case, leaving you with a large loan balance and no vehicle. Here is an example of what you would owe without GAP;
- Amount you owe on your auto loan = $20,000
- Your Insurance Company “ACV” = $16,000
- Your Insurance Deductible = $500
- Amount Paid by your Insurance = $15,500
Remaining loan balance or GAP = $4,500
GAP…For Affordable Peace of Mind**. For more information, please contact the one of our loan officers.
**This is general information only. Please refer to your actual GAP Waiver Addendum (GAP) for terms, conditions, coverage, limitations, and restrictions. GAP is not an insurance policy and does not replace or eliminate the need for vehicle insurance coverage. GAP is designed to “help” reduce the difference between your primary carrier insurance settlement and the loan balance at the date of loss. However, there are exclusions and limitations for items like delinquent payments, late charges, refundable items and financing more than the allowable Loan to Value (LTV%) limit that could leave you responsible for a loan balance after the GAP benefit is applied to your loan. You may cancel GAP during the first 60 Days and receive a full refund of any fee paid. GAP is non-refundable in most states after the first 60 Days.