Getting into a vehicle accident can be incredibly scary and confusing. In the aftermath of the incident, individuals often wonder what happens when it comes to property damage compensation if the vehicle is not paid off. Here, we want to discuss what happens after a car accident when it comes to your property damage compensation as well as GAP insurance.
The good news is that you are not the only one in this situation. However, we have to pay close attention to whether or not an individual has chosen the no-fault insurance system in Kentucky or opted for the full tort insurance system. Kentucky is what is called a “choice no-fault” state when it comes to vehicle insurance. This can be confusing, particularly for individuals not familiar with no-fault insurance in the first place.
When a person uses no-fault insurance and a vehicle accident occurs, they will turn to their own insurance carrier for coverage of their expenses, regardless of who caused the accident. Even if the other driver was at fault for the incident, a person will turn to their own insurance, particularly for medical expenses. In these cases, however, individuals can still file a vehicle damage claim against the at-fault driver.
In Kentucky, all drivers are required to carry $10,000 worth of property damage liability insurance. If another driver causes the accident, you will be able to file a property damage claim against them for these damages. Not all drivers carry the minimum of $10,000. Some opt to carry more. However, $10,000 (or the driver’s insurance limit) may not be enough to pay all of the damage. When this happens it may be necessary to file a property damage lawsuit to recover additional compensation.
One common problem that individuals run into after a vehicle accident is that the cost to repair the vehicle rises above what the vehicle is actually worth. This is usually more of a problem with newer vehicles, mainly because they depreciate so quickly after purchase. In most cases, individuals who purchase or lease a new vehicle are required to carry GAP insurance. This type of insurance is not required under Kentucky law, but the loan holder may indeed require it for a driver.
GAP insurance is important when a vehicle is considered to be “underwater,” meaning an individual owes more on their vehicle than what the vehicle is actually worth. Let us examine a theoretical scenario to see how this type of insurance helps. Let us suppose an individual purchases a new Ford F-150 for $70,000. However, let us suppose this person still owes $65,000 on the vehicle when they are involved in a vehicle accident covered by the insurance.
When this occurs, the collision coverage part of the insurance would typically pay the lender for the total amount of the vehicle, but the carrier will only pay up to the vehicle’s depreciated value. Let us imagine that the vehicle is only worth $60,000 at the time the accident occurs. Without GAP insurance, this means that the vehicle owner would be responsible for paying the additional $5,000 out of their own pocket to cover the loan of the vehicle because they still owe $65,000. GAP Insurance is meant to cover the difference between these two values.