How Does GAP Insurance Work After a Car is Totaled?

Having proper insurance on your new Honda or pre-owned car is the best way for Neptune Beach-area drivers to be prepared for the unexpected, and understanding how your insurance coverage works is crucial. One question you have is, “How does GAP insurance work after a car is totaled?” When a vehicle is totaled, your regular insurance policy will make a payout based on your car’s current value. If you are still paying off a loan on our car, this amount will most likely be less than the amount owed. GAP insurance covers the difference between the current value of the car and how much you still owe on it. 

• Example: Say you took out a loan of $25,000 but your vehicle was valued at $22,000 at the time of the accident. Your primary insurance policy will only pay you $22,000. GAP insurance will cover the remaining $3,000 so that you can pay off your vehicle. 

Learn more about how GAP insurance works after a car is totaled in this guide from the finance team at Honda of the Avenues.

What Does it Mean When a Car is “Totaled”? 

While many Orange Park drivers use the terms “totaled” and “wrecked” interchangeably, the word “totaled” has a specific meaning. A car is considered totaled when the damage is so severe that the cost of the auto repair bills are more than what the car is worth. A car can also be determined to be totaled when the cost to repair the damage exceeds 65-70% of the car’s worth. It’s a good idea to talk to your agent about what your insurance company considers a total loss to be.

What is Gap Insurance, Exactly?

For St. Augustine drivers who are unfamiliar with GAP insurance, you’ll discover that it is beneficial to have if your current car loan amounts to more than what your vehicle is worth. The reason that there can be a gap between the initial loan and the current value of your vehicle is that once you drive a new car off the lot, its value depreciates. In the event of an accident, GAP insurance will cover the gap between what you owe on your loan and what your car is currently worth. Having GAP insurance can potentially save you from paying thousands on a car you can no longer drive.

Get Your Insurance Questions Answered at Honda of the Avenues

If you have further questions about GAP insurance, the experts at Honda of the Avenues are here to help you understand all of your insurance options. When you are ready to upgrade your Jacksonville driving experience, we can also make sure that you get the loan or lease that is best suited to your budget, even if you have no credit. Feel free to contact us for more information.