Why You Need GAP Car Insurance in Florida
There’s nothing like that feeling of driving off a car lot with your dream car. You’ve saved your money, placed your down payment, been approved for your auto loan, and now you are a car owner. Congratulations! Your dream has become a reality.
But something that isn’t so dream-like is the fact that each year, millions of cars are totaled in car accidents. Even worse is that many drivers lose money when their cars are totaled because they don’t have GAP insurance. Many people don’t even know what GAP insurance is, let alone why it's so important.
What Is GAP Car Insurance?
Simply put, GAP stands for Guaranteed Asset Protection and it is used when your car is totaled in a car accident, but insurance - whether your car insurance policy or the policy of the at-fault driver - will not pay the full amount of what you owe on your car loan. Right now, you may be saying, “But I have full coverage. Doesn’t that mean that I’m covered?” The answer is no.
A car insurance company is not required to pay off the balance you owe on your car loan, even if the car is totaled in an accident that was someone else's fault. They are only required to compensate you for the current value of the vehicle. Here’s an example of what that looks like:
Say you own a 2018 Toyota Camry. You bought the car for $24,000 and currently owe $20,000 on your car loan. Your vehicle was totaled in an accident, but the Kelley Blue Book value of your car is only at $16,000. The car insurance agency is only required to pay you $16,000, not the full $20,000 you owe on the car. This leaves you with $4,000 loss.
If you have GAP insurance, however, it should cover the remaining $4,000 so you are not paying out of pocket to pay back your car loan.
How Gap Insurance Helps You in A Car Accident in Florida
For most of us, being a car owner is an important goal once you hit your teenage years. It symbolizes adulthood and independence, but it also comes with risks. I’ve talked before about how dangerous Florida roads are and the importance of being insured, but even full-coverage car insurance doesn’t cover everything.
Getting into a Florida car accident is stressful enough but adding possible debt to the equation is taxing on the mind. Without GAP Insurance, there is no guarantee that you will receive the full value of your car. Because of this, if your vehicle is totaled in an accident, you may be left still paying a car loan for a car you no longer can drive.
Factors That Increase the Need for Gap Car Insurance in South Florida
You must keep in mind that if your car is totaled in an accident, your insurance company is only required to pay you the cash value of your car which is NOT the same as however much you might still owe on your car.
Also, remember that the value of your car decreases every day that it is off of the lot. There are a number of additional factors that can decrease the payout that Kelley Blue Book or other vehicle valuation companies suggest. These factors are all more reasons to invest in GAP insurance to protect your car.
If you have gap insurance, you can avoid rolling the loan amount from your totaled car into your new vehicle loan. Rolling in an old loan is an option that many people use when trading in a car or other similar scenarios. One of the problems with rolling an old loan into a new auto loan is that it decreases the cash value of the current car you are driving. If you roll an old car balance onto your current or new car's loan, then you should definitely consider GAP insurance to ensure you are covered if your car is totaled because your loan will not only include the value of your current car but also partial value from your old car.
Another factor that increases your need for GAP insurance is a high APR (annual percentage rate) on your car loan. Recall that with a high APR, most of your monthly payment is going toward the interest you owe on the vehicle and not the actual principal balance. This means that it will take you longer to pay off the car loan and you can end up owing more on the car than its actual value.
Let’s Recap: Why You should get Gap insurance for your car in Florida
Not many people know what GAP insurance is, but after reading this article, now you know it stands for Guaranteed Asset Protection and it covers you in the case where your car is totaled, and the cash value is less than what you owe on it. You also know the risk factors that heighten your need for GAP insurance and especially the need to have GAP insurance if you are a Florida driver. You can talk to your car insurance provider to see if gap insurance is something you can add to your policy, or you can usually purchase it independently as an additional insurance policy.
Have You Been Injured In A Florida Car Accident? We offer FREE consultations for Florida Car Accident victims
If you were hurt in a Florida car accident you need to speak with an experienced Florida car accident lawyer as soon as possible. Please contact us online or call our Coral Springs law office directly at 954.755.7803 to schedule your free consultation. We proudly serve Florida residents including all of Fort Lauderdale, Boca Raton, Miami-Dade County, Broward County, Palm Beach County and all points in between.