Georgia drivers must carry minimum amounts of auto liability coverage according to state laws. While this coverage may help pay for the driver’s legal liability for third-party injuries and property damage, it does not help cover damage to the driver’s vehicle.
Many drivers customize their auto insurance coverage with additional policies and endorsements, including collision, comprehensive and gap insurance.
What Is Gap Insurance?
Gap insurance helps pay the difference between your loan or lease payoff amount and your insurance company’s settlement after your car is stolen or totaled. In most cases, gap coverage is optional. However, your lienholder may require it if you have a high loan balance or the total amount of your loan is more significant than your car’s actual cash value (ACV).
Over time, your car’s value depreciates. If your loan or lease balance decreases slower than your car’s value over time, you may owe more than your car is worth.
What Happens if Your Vehicle Is a Total Loss?
If you are in an accident that renders your vehicle a total loss or if your vehicle is stolen, your collision or comprehensive insurance kicks in to help cover the loss. If the insurance company’s settlement is less than the payoff amount on your loan or lease, you must pay the balance out of pocket.
Gap insurance helps cover the remaining balance on your loan or lease if the insurer’s settlement isn’t enough to pay off the debt.
Who Needs Gap Insurance?
Newer vehicles decrease in value quickly. In general, insurers cover a totaled vehicle up to the car’s actual cash value, which is often much less than the total outstanding balance on the lease or loan.
Gap insurance may be a good fit if you plan to finance a vehicle for five years or more, you have negative equity rolled over from a previous car loan, or your down payment was less than 20% of the vehicle’s price.
How to Buy Gap Insurance
Auto lenders and car dealerships typically sell gap insurance, but you don’t have to buy their potentially high-priced coverage. You may pay less for this essential coverage if you add it to your existing auto insurance policies.
Contact Peachstate Insurance serving the Atlanta, Georgia, area to find out whether gap insurance is a good fit for your situation and get multiple quotes for auto insurance.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.