Financing and GAP Insurance
A Part of the Georgia Car Damage Manual: How to Get Your Car Repaired or Paid-as-Totaled after an Accident
If you are still making payments on your car, it is possible that the property damage settlement may not cover all of the debt remaining on your vehicle. This can turn out to be a real problem. We hate to say it, but sometimes there isn’t a good solution. If you owed more money on your car than it was worth—in other words, you owed more money in financing than you received from the settlement of your property damage claim—you may still owe the difference to the lender. In other words (and again, we hate to have to say this, but it’s the truth) you could end up having to make payments on a car that you no longer own and that somebody else totaled, even though you weren’t at fault for the accident.
For this reason, it is a good idea to purchase “Gap insurance” when you finance or lease a vehicle. Technically, GAP is short for “Guaranteed Asset Protection,” but it is commonly referred to as Gap insurance because it helps pay the “gap” between what you owe on a car and what it’s currently worth. In other words, gap insurance protects you from having to pay more on your loan that what your car is worth.
If you are not sure whether you have gap insurance, there are a couple places to check. First, you may have paid for gap coverage when you financed the car. Check with the dealership and review your sales contract or lease agreement, as gap insurance is sometimes sold as an add-on when you buy or lease a car. Second, check your car insurance policy, as many major insurance companies offer gap insurance.
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