There is an issue that often comes up in situations in which a vehicle is totaled. Many people purchase their vehicles with loans; sometimes cars lose their value faster than the loan gets paid off, especially in the first two years of the loan. As a result, sometimes the amount that an insurance company has to pay for a totaled vehicle is less than the remaining balance on the loan.

For example, suppose someone still owes $10,000 on her car, but the value of the car is only $8,000. The insurance company has to pay the value of the car–not the amount left on the loan. This person therefore has a deficit of $2,000 which her bank or lender will probably want to collect immediately.

If you were in an accident it is always best to consult with an experienced Folsom auto accident attorney immediately after the car accident. Call (916) 357-6767 to speak with auto accident attorney in Folsom Joe Weinberger and receive a free consultation about your car accident case.

So, this person may be in an accident in which the other person is completely at fault and yet, despite her innocence, owe more than the insurance settlement and have no easy means of getting out of the debt. One way to avoid this is to purchase gap insurance. Gap insurance is a type of insurance that is often offered in conjunction with an auto loan. If the car is totaled and the remaining balance of the loan is more than the value of the car, the gap insurance will pay the bank the difference – so that, at very least, you break even.

If you make a significant down payment, so that it’s unlikely the loan balance will ever be more than the value of the car, then gap insurance would be a waste of money. But, if you’re financing heavily, you should consider gap insurance. Your lender may insist that you carry the coverage.

If you were in an accident it is always best to consult with an experienced Folsom auto accident attorney immediately after the car accident. Call (916) 357-6767 to speak with auto accident attorney in Folsom Joe Weinberger and receive a free consultation about your car accident case.