Chris DeBari:
Currently I’m going to be talking about a particular type of insurance, but before I get to that, I don’t sell insurance, but you think I would because of the fact that I talk about it so much. The reason I do is because insurance touches on and impacts the lives of my clients to such an extent it’s just never ending. T There’s always going to be issues involving insurance, as long as there are issues that involve personal injury. Those will include auto insurance. They’ll include life insurance, homeowner’s insurance, and those are always going to be things that I’m going to be involved in as an attorney because of who I represent. And I represent my clients who are personal injury victims, typically speaking.
Chris DeBari:
The way I look at insurance is something that you need obviously, it’s a necessary evil, an evil because we have to pay sometimes a significant amount of money for it, but necessary because it does protect us in case the bad thing ever happens to us, God forbid. The way I look at insurance is I kind of approach it from the standpoint of like the legs on a chair. You have your seat, but then you need the legs to support the chair. And those legs are made up of one, auto insurance, another is health insurance, a third could be homeowner’s insurance, but tonight I’m going to talk about a fourth insurance that you may want to consider because it can be very, very important as some of my clients have discovered, unfortunately, only too late, and that is GAP insurance, or GAP as they call it.
Chris DeBari:
Essentially, guaranteed asset protection, or GAP, it protects the borrower or lessee of a vehicle that the person is purchasing or leasing in the event the vehicle is totaled before the car is paid off. It does this ideally by paying the difference between the actual cash value of the vehicle and the balance still owed to the financing company after a total loss occurs. GAP is mainly used on new or used vehicles. And some financing companies will actually require that their lease contracts carry GAP insurance, or that their lessors purchase GAP insurance.
Chris DeBari:
When does GAP insurance apply? Well, GAP insurance kicks in at the time of a potential total loss.
Chris DeBari: Folks, I’m going to have to plug my laptop in here for a second because it’s telling me that my battery is running low. Mr. Rogers. Unfortunately, I don’t like to have to do this, but I don’t want to lose you all in the middle of my broadcast so please forgive me for a second while I do this. That should take care of that. And we’re back.
Chris DeBari:
GAP insurance kicks in at the time of a total loss. A total loss basically occurs when a vehicle is either damaged to the point where it’s unrepairable or to the point that your value of repairing the vehicle, the cost of repairing the vehicle is actually greater than the vehicle’s value. The way adjusters often look at this is when in doubt, total out. I was actually taught that by my good friend, an owner of Primo Auto Collision, Greg Jurkoswski; when in doubt, total out. So oftentimes adjusters are looking to total a vehicle out if it’s a close call.
Chris DeBari:
We have some people who have tuned in. Oh my God, we’ve got Jeff Jurkoswski is here. My good friend, Jeff, former client, a good friend. Jeff, thank you very much for tuning in. Kat Medel and Terry [inaudible 00:04:33] are here as well. They’re in the house. Thank you for tuning in folks. Thank you very much. I certainly appreciate you tuning in and your criticisms and comments. So please feel free to like it and share.
Chris DeBari:
The car is totaled out if the vehicle is unable to be repaired, or if the price of repairing the vehicle is greater than the vehicle’s value itself, and you see this often in cars that are a little bit older. Now, this determination of a total loss is usually made by the primary or at-fault insurance company’s adjuster. Like I said, the common wisdom is when in doubt, total out.
Chris DeBari:
What does GAP insurance cover? GAP will cover the amount on a loan, that’s the difference between the amount owed and the amount that’s covered by the other insurance company’s check basically. As you know, because you’ve watched my videos in the past, it is mandatory in the State of Florida that you carry at least $10,000 of property damage liability on your auto policy in case you cause damage to someone else’s vehicle. That’s completely separate from anything to do with bodily injury. This is just a property damage issue alone.
Chris DeBari:
Now GAP is an optional coverage in the State of Florida, and it’s also an optional coverage in the State of New Jersey, which is where I’m from originally, and a lot of my people tune in from New Jersey to watch this. GAP is optional. GAPs sometimes are marketed toward low down-payment situations, high interest loans or loans whose life will run over a 60 month or longer term. GAP insurance is typically offered by a finance company at the time of a purchase, and it’s offered in those situations because those are the situations where somebody is most likely to wind up upside down in the purchase of their vehicle. So you purchased the vehicle and something happens that decreases the value of your vehicle and of course that the vehicle is totaled at that point in time and owing a whole lot more money on the vehicle, then you have equity in the vehicle. That’s one of the reasons GAP is important.
Chris DeBari: A GAP is offered by finance companies, but insurance companies offer it too, and it’s always a good idea to shop around to see where you can get the best deal. You usually pay for GAP upfront when you’re purchasing a vehicle through a finance company, through your dealer. You may even be eligible for a refund of GAP in the event that you sell or refinance the vehicle. But be careful about refinancing the
vehicle because that’s one of the reasons why GAP could potentially be voided. It’s an optional purchase, but remember, a lot of the states in the United States might require the dealership to at least offer it at the point of purchase. Even though you don’t have to buy it, some dealers are in a position where they must offer it in certain states. That’s probably a good thing because then the consumer is more informed and aware of the things that they can purchase.
Chris DeBari:
So a scenario about how GAP may help you. Suppose you were to buy a new car for $40,000 and you finance the entire amount over, say a 60 month period. Eight months after you purchase the vehicle, you get into an accident and unfortunately, sadly, this has happened to me and many others, the car is deemed a total loss. It can’t be fixed or fixing it is more expensive than repairing it would be.
Chris DeBari:
In this case, the insurance company for the other driver would pay you the value of the vehicle. Even though you purchased it for $40,000, eight months before, at this point in time, let’s say it’s worth $30,000 because of depreciation and now because of the accident, but you owe at least $36,000 on the loan and possibly more, now if the other insurance company has enough property damage liability to pay the $30,000, you’re still going to be in the hole for $6,000. But GAP insurance would take care of that $6,000 difference between what the insurance company paid for the car and what your loan is worth to ensure that you won’t have to come out of pocket at the time of an accident. So you can understand why GAP is a very, very important thing.
Chris DeBari:
Now, what are the situations where you should consider purchasing GAP? Well, anytime you’re financing a vehicle for over say 48 months, it’s probably a good idea to look into GAP insurance. When you’re only placing in a small amount down on a vehicle, you have a low down payment, or any time you consider you could be at risk winding up upside down in your financing.
Chris DeBari:
So contra positive to that one; should you not purchase GAP? Well, you probably don’t need to purchase GAP if you were to put 20% or more down on a down payment. At that point in time, you’re probably enough ahead of the value that you’re not going to wind up upside down. However, it still might not be a bad idea to consider it. And obviously you wouldn’t use GAP insurance to purchase it if you were purchasing a vehicle for cash, because then obviously there would be no need. The replacement value from the insurance company would simply be stroking a check to you.
Chris DeBari:
Another important thing to remember, if anybody is in a position where their vehicle is totaled and repairs have not been performed on the vehicle and the vehicle is sitting in a impound lot, remember it’s collecting fees for sitting in a impound lot. So make sure the insurance company that’s going to total your vehicle is able to have access to that vehicle. Make sure you take all your things out of the vehicle so that when they come, they can take it. That’s very, very important, but at the same time, you also want to make sure in the event of a total loss of the vehicle, that you have your GAP in place and that it’s functioning in such a way that it’s actually helping you to pay your vehicle off.
Chris DeBari:
But watch out. And the reason I’m a little hung up on this, because it’s a little bit weird to me actually that this would be the case, but just as with any insurance company, anytime you purchase GAP, you’re purchasing a contract. There are duties and conditions in a contract that have to be adhered to and met. So make sure you read the fine print on these. I know a lot of people that have purchased GAP seem to be unhappy sometimes at how the arrangement has sort of worked out. There are certain times where GAP can become excluded as a creature of the contract. There may be some times when it may not apply the way you want it to.
Chris DeBari:
One example would be if you don’t maintain both comprehensive and collision insurance on the vehicle, the GAP insurer might require that. The second way would be if suppose you were to have non-factory customized parts installed on the vehicle, the GAP insurer may not want to consider that they’re going to be liable for non-factory installed parts on a vehicle. They may not want to cover money that’s rolled in to a financing agreement from a prior loan. Sometimes people are in vehicle accidents where they wind up upside down in a purchase situation. They end up having to try to salvage the situation by going and purchasing another vehicle and rolling the debt from the past vehicle into the new vehicle. So you have to watch out the GAP may or may not cover that.
Chris DeBari:
Also, costs of extended warranties are something that often may get deducted at the time of a total loss. So you may have that extra money sitting out there that GAP’s not going to cover. Sometimes you can void GAP coverage. It won’t account for overdue lease or loan payments. That’s the situation where your car is sitting in a impound lot and you’re still obligated to make payments on the car. A lot of people don’t understand that. They’re like, “If I don’t have possession of the car, well why do I have to still make payments of it if it’s a total loss?” Well, your arrangement is a contract with the finance company and you need to fulfill your part of the contract. You have duties that you have an obligation to perform? And part of those is to make sure you’re making payments until the at-fault insurance party or whichever insurance party’s going to be stroking a check for your car, pays the finance company what they’re owed or whatever portion of it that they’re going to pay.
Chris DeBari:
Of course, if you have GAP in place then GAP may cover the shortfall on what the insurance company for the at-fault party is going to pay the finance company for your vehicle. But remember, you still have that obligation to make payments on the car and don’t destroy your credit by thinking that you don’t just because you don’t have it in your possession or you think it’s unfair. It’s very, very important.
Chris DeBari:
That’s pretty much it. So remember too, you have the purchase option with GAP. You can buy it through the finance company or through the dealership, that’s financing your vehicle, but he can also shop around through private insurance, go to your own insurance company, your own auto insurance, see what kind of GAP or they offer. See what kind of terms and have a real discussion with the adjuster or an insurance agent over whether or not GAP is something that would be for you. I mentioned the times when it may be a good idea, but you should always have this discussion and ask a lot of questions particularly of insurance agents and make them aware of all of the information that is relevant to them, writing you a policy because you don’t want to suffer from their poor underwriting later on the folks.
Chris DeBari:
That’s it. Thank you very much for tuning in. This was a bit of a shorter segment than I usually do. I appreciate you coming and certainly your criticisms, your comments, and I often base entire segments on those things. This one in particular was based upon a client right now that had that very thing happened. His car is totaled. However, he is upside down on the vehicle and does not have GAP insurance. So I would urge people to purchase that for themselves. Thank you very much folks. Feel free to like, share and comment below. Thank you for tuning in. Have a great week.
For more information please call
Chris DeBari
727-656-7852
Or Email
Chris@CDBinjurylaw.com
