Car Crashes and the Need for GAP Insurance

Not long ago, a couple came to see me who had recently purchased a new Mercedes Benz for the sum of $80,000.00.

Unfortunately, a week after they drove the car off the lot, they were involved in a car crash.

They had great insurance themselves. Their policy limits were $300,000/$500,000 and they had a $1 million dollar personal umbrella policy. They were sophisticated consumers and had taken every reasonable step to protect themselves except – they had not purchased GAP insurance.

GAP insurance is insurance that covers the gap between what you paid for the car and the current value of the car.

In California, your and/or the ‘at-fault’ drivers auto insurance is only responsible for the fair market value of your vehicle.

The problem is that as soon as a car is driven off the lot the fair market value diminishes tremendously.

In this case, my clients put 20% or $16,000.00 down on their car leaving a balance due of $64,000.00.

When the insurance companies sent an appraiser to look at the car, it was determined that the car was ‘totaled’ which meant it was beyond the point of repair.

The insurance company paid the lien holder the fair market value of $68,000.00. (Actually, $64,000.00 was paid for the car lien and $4,000.00 to my clients directly.)

As can be seen, my clients put $16,000.00 down and only received $4,000.00 a week later.

This was an expensive lesson and it’s one I don’t want you to experience. If you buy a new car, insist on GAP insurance.

If my clients had purchased it, in this instance, the lien of $64,000.00 would have been paid, and my clients would have been returned almost all of their $16,000.00 down payment.

Posted In:
Updated:

Client Reviews

  • Me and my wife; had a car accident. We were amazed how easy, professional, friendly attorney Ed Smith is along with his staff. Everybody is amazing. Thank you so much, we are very impressed!
    Sincerely,
    ★★★★★
  • Ed Smith and his office team took on a difficult personal injury case on my behalf and for the passenger in my car. Ed is a top- notch attorney. His staff couldn't have been more helpful and kind. No need to look elsewhere. I give Ed Smith my highest recommendation.
    ★★★★★
  • Ed and Robert have been taking great care of my husband and I for the past 5+ years. They are always there when you have a problem and a quick resolution! Even when the issues have nothing to do with them. They are willing to help ease the pain off your shoulders. They are as good as it gets! Thank you again for everything.
    ★★★★★
  • Very professional. Great team, staff and service all around. Mr Smith was very honest, straight forward with his advice. He gives the word "attorney" an honest reputation. I will seek his council anytime, and would recommend him at the drop of a dime.
    ★★★★★
  • I would highly recommend Ed Smith to any friends or family in need of a personal injury attorney. Ed, and his staff, are very caring on top of being very experienced in this field. The staff always keeps you informed of the status of your case and they are always easy to reach by phone.
    ★★★★★
  • Edward Smith law offices provide competent, thorough, and personable help for victims of personal injury. When you first meet the staff you know you contacted the right office. This law office treats clients like people. I recommend this office to anyone seeking representation regarding personal injury.
    ★★★★★