If you recently purchased a vehicle, it’s likely that you don’t have much equity in your car. If your car depreciates faster than you pay down your car loan, you could end up owing more on your car than what it’s worth. If that’s the case and you get into an accident that your insurance company considers a total loss, you will only receive compensation for the value of the car. This could leave you having to come out of pocket to pay off your loan if you are in an accident. However, there are three ways to bridge the difference so you aren’t left owing money on your car after it has been in an accident.
There is insurance for just this problem, it’s called GAP Insurance. GAP insurance – Guaranteed Auto Protection or Guaranteed Asset Protection – covers the difference between the actual cash value of the vehicle and the balance still owed on the financing. This is not normally included in your standard insurance coverage, so it’s something you will need to add if you think you owe more on your vehicle than it’s worth. Once you have been in an accident, you can’t add it after the fact, so it’s important to have this in place to protect you in the event you do get in an accident.
Prove that Your Car has More Value
If you feel that your insurance company has not given you enough money for your car, contact them and let them know. Be sure to have proof of why your car is worth more and documentation to back it up. We recently wrote a blog post about what to do if your insurance money doesn’t your car loan explaining more about how to proceed with this.
Money from a Personal Injury Claim
If you were injured in the car accident in which your car was totaled, you might be able to file a personal injury claim to pay for your medical expenses and other losses you sustained. If this is the case, you could use money from this settlement to make up the difference. While we definitely do not recommend filing a personal injury claim in order to make up the difference between what you owe and the value of your vehicle, you might have extra money from your settlement that could help bridge the gap.
If you have been in an accident and were injured, please feel free to give us a call at 949-496-7000. The first call is always free and we can help discuss your options for getting compensated for your injuries.