Buying a new car is never simple. Between high-pressure sales tactics and weighing the needs of the family (minivan?) versus the needs of self-image (sports car?), there is a lot to think about. Add to that the seemingly endless supply of forms that must be signed at the tail-end of the process, many including options that serve only to increase the cost of the car, and the only guarantee is a frustrating process.
We have been litigating automobile accident cases in Maryland and West Virginia for years. Our team of personal injury lawyers knows that one option which should be considered is gap insurance. Here’s how it works.
Any new car loses value the instant you drive it off the lot. That is, within a short time the car will be worth less than the total cost you paid (including financing). The problem arises when a financed car is involved in an accident. If the car is totaled, the insurance company will only pay the fair market value of the car (that is, what the car is worth on the open market). See the Kelley Blue Book or NADA for some guidance. That fair market value is frequently less than the amount you owe on the car.
This means that after an accident, not only will you lose a car and have no means to replace it, all of the money from the property damage will go to the finance company and you will still owe the finance company money. This makes it extremely difficult to pay it off and get into a new vehicle.
Gap insurance is typically offered by the dealership. For a small amount, they will pay the difference between the fair market value and the amount you owe on a car. Like all insurance, we hope you never have to use it. If you do need it, however, you’ll be thankful that you have it.
If you have questions after automobile insurance, contact the lawyers who fight insurance companies on a daily basis. Call us at 1-800-776-4529, or send us some brief information about your automobile accident to us through our online portal.
More Maryland Automobile Accident Information
- Maryland Insurance 101: Collision (Property Damage)
- Maryland Insurance 101: Uninsured/Underinsured Motorist Coverage (UM/UIM)
- Maryland Insurance 101: Personal Injury Protection (PIP)
- Hit-and-Run Claims with No Insurance Available