Many Florida residents are surprised to find they still owe money on their car loan after insurance pays for their total loss vehicle. How does that happen? The answer is the insured or claimant still owes more money than the motor vehicle or automobile was worth at the time of the accident. Insurance pays for a total loss vehicle (i.e., when value is less than the cost to repair) the Insurance company pays its fair market value, not the amount owed on the loan or what it will cost to get another similar or replacement vehicle.
As understood by most, a motor vehicle loses a significant amount of its value when merely driven off the sales lot. How can one be protected? GAP (Guaranteed Auto Protection) insurance is a type of insurance coverage which pays the difference in these situations between what one owes the bank or lender on their auto loan and what the car was worth at the time of the subject accident.
Generally, GAP is not prohibitively expensive and can be a major protection if involved in a motor vehicle accident and one has a financed car. When insurance pays the value of a depreciated vehicle, which was financed, GAP insurance pays that difference on the remaining balance of the loan. No Florida resident wants to pay for a vehicle they cannot use.
Specifically, Gap insurance in Florida works the same way as GAP insurance in the rest of the U.S. It pays the balance remaining on a car loan or lease contract after a liability, comprehensive, or collision policy coverage pays out the actual cash value of a totaled vehicle. The state of Florida does not require any driver/owner to carry GAP insurance. However, certain lenders in Florida may require customers to carry it if they get an auto loan or lease.
Various companies, including banks and dealerships, offer GAP insurance in Florida. While an individual should take their time deciding which one is right for them, one can also have confidence that it can provide a major protection under their particular circumstances at the time of an unfortunate accident.
It is worth noting that GAP coverage is usually cheaper to purchase from an insurance company than a dealership.
GAP insurance takes about 5-45 days to pay the policyholder after an accident insurance claim is filed. For drivers to receive a GAP insurance payout, the subject vehicle first needs to be declared a total loss, and the insurance company needs to accept the claim.
Again, if a person financed a vehicle, Florida GAP insurance covers the outstanding balance that remains in the event that their motor vehicle is totaled, and they owe more on the auto loan than the actual cash value of the vehicle. GAP insurance in Florida can be purchased from an insurance provider, the dealership, or even stand-alone companies. However, the cheapest Florida GAP insurance rates come from insurance providers at an average of $5.00 per month or $60.00 annually, subject to inflation.
Finally, one can drop GAP insurance from their Florida auto insurance policy after a sufficient payoff of the applicable loan, so the specific vehicle is worth more than the remaining loan balance, or at the very least, when the said loan is paid off.
If you should have additional questions, please contact your insurance agent, insurance carrier, dealer, lender or one of the attorneys at CASERTA & SPIRITI before an auto accident occurs.