My loss

Hi Lette,

In an at-fault accident, wher eno other cars are involved, comprehensive auto insurance covers the value of the vehicle - i.e., the "fair market value" or "actual cash value" (for an explanation of actual cash value, see http://personalinsure.about.com/library/glossary/bldef-002a.htm). Comprehensive insurance usually does not, however, cover the value of the loan you still owe to the bank... which may be quite a bit more than the current value of the car.

The purpose of gap insurance is to insure you for the difference between what you owe on your car and what your insurance company says the car is worth. Gap insurance is important because, the second you drive your new car off the lot, its fair market value can drop to as little as 80% of what you paid. That means, if you're in an accident and your new car is totaled, the amount you still owe on your car is likely to be much more than the amount your insurance company is willing to pay out. Gap insurance makes sure you aren't left owing money on a car you can't even drive anymore.

You generally only need a gap insurance policy in the first few years you have a new car - that period when the amount you still owe is likely to be much more than the fair market value of the car. Because you said your gap insurance policy paid out to your lender, I am assuming that you still owed more on the car than the car was worth. If that is the case, then you will not personally receive any compensation. The policies that you bought to cover your car have simply allowed the finance company from which you obtained your auto loan to be repaid.

For a simple explanation of how auto gap insurance works, see http://www.autoinsuranceindepth.com/gap-insurance.html .

For more specifics on your Nationwide policy, or to report your claim online, go to http://www.nationwide.com/insurance-claims-center.jsp .