Imagine driving through the scenic foothills of Port Jefferson Station or Gordon Heights, New York on your way to the farmer’s market and you are involved in an accident. Contacting your insurance company and possibly filing a police report are your first priorities. When the details of the accident are brought to light, you may have to pay a portion of the damages, depending on who was at fault.
A thought that must cross your mind is if you are at fault, who pays the expenses? While your insurance company pays a portion, if you purchases gap insurance when you purchased your car, you are in luck.
Gap insurance is not mandatory, but instead a supplemental insurance that pays the remaining balance due as a result of an accident. For example, if your vehicle is worth $20,000 when purchased and total damages equal $18,000, the gap insurance pays the $2,000 difference.
Although the thought of any type of insurance paying the remaining balance after an accident seems ideal, gap insurance does come with warnings. You are still potentially liable for costs associated with an accident if you do not have the proper amounts of comprehensive and collision insurance. Check with your insurance company to see the required amount needed for your state.
Another consideration of gap insurance is certain insurance companies only pay the replacement value of the car, not the remaining balance. For example, if your car is valued at $20,000 and accident costs amount to $15,000, but the replacement value is only $10,000, you are responsible for the remaining $10,000.
The best case scenario is to check your insurance policy to ensure you are properly covered in the event you are involved in an accident, or contact your agent.