[GRAPHIC: HD Fox 2 News St. Louis]
Man: If you're buying a new car often requires navigating that confusing road of extras and add-ons from the dealer, everything from undercoating protection to extended warranties, and there's often something called gap insurance. And Thomas Neill from the law firm of Gray, Ritter & Graham in St. Louis joins us now.
Your firm just had a settlement about one of these companies, which we'll get to in just a minute, but first tell us what gap insurance is and how it differs from other warranties that might be sold at the point of purchase.
[GRAPHIC: Thomas Neill, Gray, Ritter & Graham]
Thomas Neill: Sure, and thanks for having me. Basically what will happen is after a consumer has negotiated a purchase price, they've picked out the car that they want and they go to sit back in with the dealer and fill out the paperwork, one of the things that will be presented to them along with the extended warranties and the other features that you mentioned would be the gap policy, and that is designed in theory to provide a consumer with a benefit if there's a total loss on the vehicle. And essentially what will happen, if your car is totaled or stolen and you owe the lender, let's say $15,000, but your insurance company only gives you $14,000, because that's what they said the car is worth, the gap is designed to make up that difference so that you don't owe your lender any money.
Man: So is it a good idea to get this insurance, or how do you know - What's some buying advice for people here?
Thomas Neill: It can be. Typically the policies, the gap policies, run less than $500. That's usually about the upper limit, so for some consumers it might be a decent idea to get that. They'll have to make that decision on their own, but one of the things that they'll certainly want to do is read the policy carefully, make sure they see what's in the fine print, and if it looks like there's the opportunity for the claims administrator - the gap claims administrator - to have some discretion over how much they actually pay you at the end of the day, that would be the flag that I would suggest consumers be wary about.
Man: And that was the gist of the case that you recently settled, was that correct? Where the warranty company was not paying out the amount that they were supposed to?
Thomas Neill: Well, that's certainly what we argued, and that's what was involved in that settlement. Essentially if the insurance company, going back to our example, where there's a $15,000 payment owed to the lender on the balance of the vehicle. If your insurance company only sent you a check for $13,000, but the claims administrator would suggest that the value of the car was actually $14,000, they would only pay you $1,000 instead of $2,000, and then you'd be left holding the bag for that remaining thousand dollars.
Man: OK. Lots to think about here. It's called gap insurance. Do your homework, like always, before you sign up for one of these policies.
[GRAPHIC: Fox2now.com]
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