Over the last 25 years of practicing Personal Injury law on Long Island, I have spoken to countless clients involved in car accidents in Nassau and Suffolk County. In many cases they have had to pay out thousands of dollars for cars they no longer owned even when the car accidents were not their fault. Although it seems unfair, it is a reality for many people that own cars with outstanding loans and do not have GAP insurance.
GAP stands for Guaranteed Auto Protection, and provides protection for the difference between what your car is worth and what you still owe on the car loan when your car becomes totaled, stolen, etc. In New York state every car lease is required to include GAP coverage as part of the lease. However, there is no requirement when you purchase and finance a new or used car. The average new car loses about 20% to 30% of its value in the first year, and after three years it is likely only worth about half what you purchased it for. For example, if you purchased a new car for $30,000.00, your insurance company would probably only pay you about $21,000.00 for a total loss in the first year. Without GAP insurance you would be out of pocket that $9,000.00 difference, and the person that caused the accident would not be responsible for reimbursing you that amount. Remember, if you drive many miles each year, your car will depreciate even faster.
GAP insurance is available from all new and used car dealers, but you must specifically request it. Also, most car insurance companies offer GAP insurance, and possibly for a third or quarter of the price of the dealer. In addition, GAP insurance is available from stand alone companies such as www.gapdirect.com, that only sell GAP insurance. The GAP insurance offered by your car dealer is likely the most expensive, so shop around before you purchase it from them as you could save hundreds of dollars. If you purchase it from your car insurance company or a stand alone company, you also will not be paying interest on the cost like you would if you rolled that cost into your car loan payment. With the insurance companies, you can also cancel the coverage when you don’t owe more on your loan than the value of your car and no longer need the protection.
If you already have purchased a car and have a loan without GAP insurance, it is not too late to add it. The dealer likely can’t help you, but your car insurance company and the stand alone companies will sell you a policy as long as it is not already damaged.
The cost for GAP insurance varies, car dealers typically charge in the $500.00 range and more which covers the loan period. Insurance companies may charge as little as $150.00. When comparing costs, just make sure you are comparing the same coverage/protection.
If you have any questions you can call me at 631-402-5527, I would be happy to speak to you about GAP insurance or any other car insurance related question.
Keep it safe out there.
Mark T. Freeley, Esq.