If you are involved in a motor vehicle accident, in which you are NOT at fault, the at-fault driver will be liable for the cost to repair your vehicle, or, if the vehicle is deemed a ‘total loss’, the actual cash value (ACV) [also known as fair market value (FMV)] of your vehicle. Fair market value has been defined as “the amount of money which a purchaser willing but not obliged to buy the property would pay to an owner willing but not obliged to sell it.” Calculating the actual cash value of your vehicle is left for a separate blog.
What if the fair market value of your vehicle is less than the amount you owe on the loan from the bank. [ex. the value of your vehicle is $10,000 but you still owe $12,000]. In Florida, you are not entitled to recover this $2,000 loss from the at-fault driver or his/her insurance company. To avoid this situation, you may wish to purchase ‘gap’ insurance. Gap insurance is an optional, add-on car insurance coverage that can help you cover the “gap” between the amount you owe on your car and the car’s actual cash value (ACV). Again, your car’s actual cash value is the car’s monetary value at the time of the accident, not the car’s original price. You can purchase gap insurance as part of the insurance plan offered by your auto insurer, or you can purchase stand-alone gap insurance from a car dealer or lender.
I realize everyone is trying to reduce their monthly expenses including auto insurance. However, it is important to understand the coverages available so you can make an informed decision when buying insurance. I am willing to speak with you regarding the coverages you have on your policy.
