Question on my GAP Policy - Is this for real?

CruiserGuyCruiserGuy Member Posts: 3
edited November 2018 in General
I'll make this as concise as possible. I was rear ended last month and my car was deemed a total loss. I owed 76k, and the insurance company is offering me 40k. My total deficiency balance is 36k.

I read my GAP policy that I purchased through my dealership (CNA National is the GAP insurance company) and according to my understanding, the GAP insurance covers up to 150% of the MSRP of the vehicle when new or 150% of the NADA value if the car was used. I purchased the car new and the sticker price was 77k. Obviously I fit under this parameter, or the contract would not have been able to be executed.

Under the limits of payment section of my GAP contract, CNA will cover the difference between the ACV/settlement amount from insurance and the balance on my loan or 50k, whichever is less. So basically they won't cover negative equity in excess if 50k.

In my case, I have perfect payment history and CNA has no reason to not pay the claim. Am I correct in assuming that given the facts above that I am going to walk away from this with my loan paid off and get a fresh start?

I worked in F&I for a bit in college, and I know there are different GAP policies out there. According to my reading of the contract I think I may be the GAP insurers worst nightmare - a guy that is absolutely buried in negative equity but due to an accident that wasn't my fault, I am wiping my hands and my credit clean of this debt and moving on.

Any insight or confirmation is appreciated. I almost feel like its too good to be true.

Comments

  • kyfdxkyfdx Moderator Posts: 210,201
    As you describe it, it appears they should pay off.
    But, it's an insurance company. Denial of a claim is always a possibility.

    From the insurance companies perspective, there are a lot of red flags.
    Why do you still owe $76K on $77K MSRP vehicle, when the ACV is $40K?
    How long have you had the vehicle, and what was the original amount financed?

    Before you accept any offer from your car insurance, you better get the GAP provider involved. It's possible they will contest the settlement offer, as they are the ones at risk. They may also contest the insurance company's evalution of the damage. The insurance company may want to total it, but your GAP provider may want it fixed for $50K, even if they have to come up with the $10K.

    I'd look for some fine print, where they can replace your vehicle with a replacement, if they choose (unlikely).

    The chances of them writing a $36K check to your bank, without contesting or investigating seem pretty slim.

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  • CruiserGuyCruiserGuy Member Posts: 3
    the car is a Cadillac ct6. in 18 months I have put 65k miles on it due to my commute. I rolled a good amount of negative equity over on it, but the deprecation and mileage have caused the cars value to tank. The other drivers insurance company is using CCC to value the car, which is common practice. I don't really care what value they put on it as long as I am below the 50k max payout, which I should be even in the worst case scenario. The original amount financed was 90k, which is within the 150% of msrp the contract requires.

    The GAP insurance company has no bearing on if the car gets repaired or not. The damage has exceeded the 70% threshold required by my state, so it is a total loss.

    They can certainly investigate it all they want, but my car deal and everything else fits in their parameters.
  • kyfdxkyfdx Moderator Posts: 210,201
    The chances of them writing a $36K check to your bank, without contesting or investigating seem pretty slim.

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  • Mr_ShiftrightMr_Shiftright Sonoma, CaliforniaMember Posts: 64,482
    GAP does often cover negative equity but there are often limitation clauses, depending on loan term and what you put down initially. So the final answers rests with the insurer and the reading of the policy.
  • CruiserGuyCruiserGuy Member Posts: 3
    I called CNA and asked the rep if my understanding was correct. I was told I was - there is no calculation done based on 150% of the cars value at the time of the accident, or any limitation to the amount paid based on taking the MSRP less the ACV. There are a myriad of products out there that limit the percentages to 110 or 125%, but mine is not one of those. NOWHERE in the terms does the 150% of any number come up except related to the inception of the contract when calculating what contracts apply, and that is based on 150% of the MSRP of a new car, which I was under. My MSRP was 77k, I financed 90k.

    At the time of the loan, my contract was under the 150% of MSRP required for the GAP contract to be valid. If it had not been under that threshold I would not have been able to purchase that product. All payments made timely and of course no foul play of any kind.

    According to the exact diction in the contract under the agreement section:
    "In consideration of the purchase price paid, Dealer/Creditor agrees that in the event of the total loss of the vehicle, and subject to all the terms and conditions of this addendum, Dealer/Creditor will waive your liability for the difference between the net finance contract payoff as of the date of the loss and the actual cash value; Dealer/Creditor will also waive your primary automobile insurance company deductible not to exceed $1,000; and the total amount of your liability the Dealer/Creditor will waive will not exceed the maximum limit of payments.

    From the "maximum limit of payments section":
    "The maximum of your liability the Dealer/Creditor will waive for any one claim shall be the lesser of:

    1. the difference between the net finance contract payoff and the settlement of your primary automobile insurance company or
    2. $50,000 in total.

    I have read the contract carefully, I am a CPA and feel comfortable with the language. I probably read more contracts than the average customer, but I am not an attorney. When I ready the above I feel as if I am covered.
  • kyfdxkyfdx Moderator Posts: 210,201
    No one is doubting your knowledge of the contract.

    But, if you lived in Vegas in 2010, and your house burned down, while you were upside down by $100K, the insurance adjuster isn't just going to show up with a check the next day.

    And, in a related case, if your ACV is $36K under your loan balance, I wouldn't expect CNA to show up with a check the next day, either. I can't imagine they would consider that a normal loss, and you can bet your claim will receive extra scrutiny.

    It doesn't mean they won't eventually pay off. But, be prepared for a long slog.

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