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How Does GAP Insurance Protect You in a Car Accident? - YouTube
Channel: LawFull
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- Were you involved in a car
accident and you're wondering
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how your GAP insurance is gonna work,
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or maybe you're about to buy a new car
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and you're wondering if you
should get GAP insurance?
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Check out this short video to find out.
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(upbeat music)
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Hey, everybody.
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This is Barry with the LawFul channel.
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I'm a personal injury attorney,
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and I have a nationwide
network of lawyers.
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So if you're involved in an accident,
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please feel free to reach out to me.
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Chances are I know somebody
near you who can help.
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Now let's jump into the video.
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The reason I wanted to do this video
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is not because GAP insurance
is a very sexy topic, it's not.
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But I've seen a lot of
misinformation on YouTube about it,
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and so I thought I should do my own video
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directly on this topic.
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Now, a lot of people say you
shouldn't get GAP insurance.
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My point is, they've never seen it
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from the personal injury attorney side.
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The damage it can do
to somebody's finances
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when they don't have GAP insurance
in certain circumstances.
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So that's why I wanted to do this video
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and I hope you find value in it.
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So the most common question
I get on this channel
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is what happens if my
vehicle is a total loss?
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This happens all the time.
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I did a whole video about
total loss vehicles.
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I'll put it in the comment section below
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so that you can check it out
after you watched this video.
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So let's talk about a
total loss very briefly.
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Let's take a hypothetical.
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You buy a vehicle for $20,000
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and six months later you
get into an accident,
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and the vehicle is totaled.
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Well, the second you drove
that vehicle off the lot,
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it lost a ton of value.
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You already know that, right?
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And if you're dealing with
an insurance adjuster,
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you may be finding that
out for the first time.
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Anyway, so how does it work?
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The insurance adjuster
will look at the vehicle
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and say that the actual cash value
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of the vehicle is $15,000 or whatever.
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So that leaves a $5,000 gap
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between what the insurance
company is willing to pay
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and is obligated to pay,
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and what you owe on your finance vehicle.
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So what the insurance company is gonna do,
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is they're gonna cut a check for $15,000
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or whatever the actual cash value
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of the vehicle is to the finance company.
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They're not gonna cut the check to you.
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They're cutting the check
to the finance company,
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and that will leave in, in this scenario,
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at least a $5,000 balance.
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Well, what happens to that?
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Well, you're on the hook for that.
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You have to arrange with
your finance company
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to pay off that debt.
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It probably is gonna be
involving you continuing
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to make your monthly payments
until the debt is gone.
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What's the only way to
avoid a situation like this,
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it's to buy GAP insurance.
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Now, you can buy GAP insurance
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from either the car dealer where
you're buying your vehicle,
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oftentimes the finance person
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who's trying to push GAP insurance on you,
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or you can buy it from
an insurance company,
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State Farm or Allstate or whatever,
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and a GAP insurance,
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which stands for Guaranteed
Asset Protection,
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will cover the difference that you owe
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in the hypothetical that I gave.
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GAP insurance doesn't
cost that much money.
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I've seen it cost 20, $30 a month,
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which is significant when
you add it onto a car payment
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that you're already making.
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However, God forbid you're in an accident,
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It will really benefit
you in that situation.
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So there's one main situation
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when you really need to get GAP insurance,
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and that's when you don't have
any equity in your vehicle.
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What do I mean by that?
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Well, let's take my hypothetical.
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Let's say that you purchased a car
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and you finance the full
cost of the car, the $20,000,
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where you have no equity in that vehicle.
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Just like if you purchased
a house, what you put down
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is your equity and the
payments you make over time,
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and without many payments,
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there's gonna be very little
equity in the vehicle.
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You can buy GAP insurance
on a used vehicle too,
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and if you buy a used
car for $5,000 or $4,000,
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chances are you're not
buying GAP insurance.
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So again, my point is,
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that if you buy a car with
very little equity in it,
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that's when you really need GAP insurance.
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Now, before you get all excited and think,
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okay, I'm gonna run out
and buy GAP insurance
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because it's the answer
to all my problems,
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I wanna clarify something real quick.
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I got a call from a woman this past week
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who was involved in an accident
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and her car was totaled
and she had GAP insurance.
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So it paid off the difference
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between what the actual
cash value of your vehicle
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or her vehicle was and what
she owed the finance company.
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But she said to me, this still isn't fair.
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I've been making payments on this vehicle,
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and I put a couple thousand dollars down
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and now, great, the car is paid off,
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but I've got no money to buy a new car.
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It's not fair.
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And you're right, the system is not fair.
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However, I had to tell her,
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and I'll tell you the same thing,
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that just because GAP
insurance paid off your vehicle
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it doesn't mean you're gonna
then have a down payment
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on a new vehicle.
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That's just intended to cover the balance
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on the vehicle that was totaled.
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So GAP insurance is not the answer
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to all our questions or all our prayers,
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however, still can be beneficial.
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Two additional thoughts for you.
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One is that, the GAP
insurance will kick in
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whether you're the victim of the accident
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or you caused the accident.
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And then secondly, GAP
insurance is really important
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for all vehicles, not just cars.
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I mean, this is really
applies to motorcycles too.
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I've seen a lot of guys
buy $30,000 harlots
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and put very little money down,
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and then they get in an accident
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and the vehicle gets totaled,
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which is very common in
a motorcycle accident,
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what do you do?
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Well, those guys are on the hook
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to Harley-Davidson Finance Company
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or whoever they finance the
vehicle through for 25, $20,000.
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So GAP insurance applies it
more than just car accidents.
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One final thought about
GAP insurance and that is,
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if you've been paying GAP
insurance for three or four years,
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and your vehicle almost paid off,
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you might wanna call your dealer
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or your insurance agent
or your finance company,
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definitely your finance company,
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and see if it's okay if you
can cancel your GAP coverage.
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And the reason being is because,
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you now have a lot of equity
in your vehicle, right?
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You've been paying it off
for four or five years.
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Some loans go out seven years, these days.
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So if you've developed a lot
of equity in your vehicle,
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you may not need the
GAP insurance anymore.
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Were you involved in an accident
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and the value of your
vehicle was way lower
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than the amount that you financed?
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Tell us about it in the
comments sections below.
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Again, my name is Barry.
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I'm a personal injury attorney,
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and I have a nationwide network
of lawyers here to help.
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If you need any assistance,
please reach out to me,
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and if you have any questions or comments,
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put them in the comments section below.
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Thanks and have a great day.
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(upbeat music)
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