How Does GAP Insurance Work After a Car is Totaled?

Insurance Agent Examining Car After Accident

Understanding how GAP insurance works is important, whether you’ve been involved in a major collision or not. Our finance team at Ole Ben Franklin Motors wants to make sure you’re covered in the event of a collision. While GAP insurance isn’t a required form of coverage, it can be beneficial to have. So, how does GAP insurance work after a car is totaled?

If your vehicle is totaled, your insurance company will get you a payout based on the vehicle’s current vehicle. If you have an auto loan, that often means you will receive less than the vehicle is worth. What GAP insurance does is cover the difference between the auto loan and original payout. Learn more about how GAP insurance works with the auto finance experts at Ole Ben Franklin Motors, below.

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What Counts as a Car Being Totaled?

When a vehicle is totaled, it means that the damage is so severe that the vehicle’s value will be exceeded by the cost of the damage. If your vehicle is totaled, you’ll want to have your insurance company out to assess the damage and find out exactly what they would consider a total loss.

What is Gap Insurance?

So how does GAP insurance work on a total loss? The GAP insurance “gap” refers to the difference between the initial loan cost and the vehicle’s current value. Should you get into an accident, the GAP insurance coverage will ensure you don’t end up paying off the remainder of the loan out-of-pocket.

For example, if you took out a loan for $20,000 on a vehicle, which ends up being valued at $18,000 when totaled, you’d only get $18,000 from the primary insurance policy you have, leaving $2,000 for you to pay out-of-pocket. If you have GAP insurance, this $2,000 would be covered.

Find Out More About Insuring Your Vehicle with Ole Ben Franklin Motors

Looking to learn more about how gap insurance works when your vehicle is totaled or you want other insurance tips? You can trust the team at Ole Ben Franklin Motors to help with your car-buying and auto finance coverage questions, so contact us today!

 

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