How Does Gap Insurance Work After a Car is Totaled?

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In the event of a collision, you want to be sure you have the proper insurance coverage to minimize any out of pocket expenses. This may have drivers in Brandon wondering, “How does gap insurance work if your car is totaled?” There are several great reasons to opt for gap insurance coverage. See how it works and how it can benefit you with the finance experts at Reeves Volkswagen.

What is Gap Insurance?

Gap insurance can be helpful if you are making loan payments, and the current loan balance on your vehicle is more than what the car is worth. Because new cars depreciate immediately after leaving the dealership, there is a period of time where it is likely that you will owe more than the car’s value. If you get into an accident around Wesley Chapel during this time, gap insurance helps cover the gap between what you owe on your loan and its current value. Having gap coverage can help save you a significant amount of money, making it a smart choice for many Clearwater car buyers.

How Does Gap Insurance Work if Your Car is Totalled?

If your vehicle is totaled following a collision, your regular insurance policy will make a payout based on the current value of your vehicle, minus the amount of your deductible. For many drivers with an auto loan, this amount could be less than what is still owed. Here is where gap insurance takes over. This insurance will cover the difference between what you received from the initial payout and the auto loan.

Here is an example:
If you took out a loan of $25,000 and your vehicle was valued at $22,000 when the collision occurred, your primary insurance would only pay that $22,000. Gap insurance covers the $3,000 still left over so that your car loan can be paid in full.

Learn All About Insurance with Reeves Volkswagen

Do you have additional questions like, “how does gap insurance work on a total loss?” If so, the team at Reeves Volkswagen is here to answer all of your insurance inquiries. Contact us today for more information.

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