After much deliberation, you purchase a brand new car. The payments are a little high, but they’re manageable and you have four years to pay it off. If your research pays off, you won’t have to deal with car repairs for a long time. But just six months later, a distracted driver runs a red light and t-bones you. You’re bruised and sore, and your new car is totaled.

After the insurance adjuster confirms your vehicle is a total loss, he offers you $19,500 to settle your property damage claim. But you bought your car just six months ago and you owe the bank $24,000. “The law only requires us to pay market value for a vehicle,” you hear the adjuster tell you. “Do you have GAP insurance?” he asks.

What is GAP insurance?

When a vehicle is totaled in an accident, auto insurance companies typically cover the amount of the car’s actual cash value (ACV), not the amount you owe on the loan, which can be significantly more.

GAP insurance stands for Guaranteed Auto Protection and protects drivers from unforeseen financial losses if their car is totaled in an accident. It provides a financial bridge between what is owed on a car loan and the vehicle’s estimated worth, which, in the state of Arizona, is the market value calculation.

How it works

Once a new car is driven off the lot, it immediately depreciates in value, sometimes as much as 30 percent within the first few months. If a vehicle were totaled in a collision, GAP insurance would cover the difference between what is owed and the vehicle’s estimated worth. This means you won’t be held responsible for paying the difference.

Who should have Gap insurance?

In most cases, GAP insurance is relatively low cost and can ultimately save you thousands of dollars.

People who are leasing cars or who have financed their vehicles should have GAP insurance–especially if the car is a newer, more expensive model that depreciates rapidly.

Others who should consider GAP insurance are people who drive more than the average 15,000 miles annually or who have financed for 60 months or more.

Remember that there are limits on the amount that a GAP insurance policy will cover. You should check with your auto insurance provider for details. Some policies require comprehensive coverage on your personal policy.

This information is provided by Hollingsworth Kelly to help you select the right coverage for your auto insurance needs. All insurance decisions should be discussed with your auto insurance agent so that you can make an informed decision to best suit your needs. This information is not intended to serve as legal advice.


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Purchasing auto insurance is one of those activities that most consumers don’t put much thought into. They know they have buy auto insurance because the law requires it.

Most consumers either call their family insurance agent, or the insurance company with the most clever TV commercial. But not putting much thought into your car insurance purchase could have dire consequences if you are injured in an auto accident.

Typically, consumers buying car insurance tell their insurance agent they want “full coverage.” Their policies will be written so that they are protected should they be at fault for an accident.

However, we frequently see problems when consumers do not request additional coverage in case they are injured in an auto accident by a person who is not insured (uninsured) or does not have adequate insurance (underinsured). Unfortunately, during an economic downturn, this problem is even more pronounced, with more people driving around with little or no insurance coverage.

Uninsured (UM) coverage will protect you if you are injured by someone who does not have insurance; Underinsured (UIM) coverage will protect you if you are injured by someone who does not have enough liability insurance to adequately compensate you for the injuries they caused you in an auto accident.

Your policy should include coverage for UM, UIM, and Medical Payments (Med Pay). The policy limits for UM/UIM will depend on the coverage you selected on your policy. We recommend that you carry as much coverage as you can reasonably afford, but if at all possible, you should request policy limits of no less than $100,000/$300,000. If you can afford higher limits, by all means you should increase these limits. Med Pay should be at minimum $5,000.

Declarations Page

We urge you to review the Declarations Page of your auto insurance policy for UM, UIM and Med Pay coverage. Make an appointment with your insurance agent to add coverage in these three areas if they are not included in your policy.

This information is provided by the Hollingsworth Kelly to help you select the right coverage for your auto insurance needs. All too often, we see people who are injured by someone who does not have adequate insurance coverage. All insurance decisions should be discussed with your auto insurance agent so that you can make an informed decision to best suit your needs. This information is not intended to serve as legal advice.