by Kelly Eargle

Question: My car is now worth far less in Blue Book value than the amount remaining on the loan I took out to buy it. If my car is stolen or totaled and insurance will only pay the Blue Book amount, do I have to pay the difference out of pocket?- Ryan H.

Answer: Yes, you have to pay the difference out of your pocket, unless you have Gap Insurance. When cars are "totaled", insurance companies typically pay the market value, minus depreciation and the deductible. The difference between your loan balance and what your insurance company gives you remains your obligation to repay. This typically happens when you owe more to your lender than the car is worth, but can simply be from having a high insurance deductible.

However, there is good news! "Gap" Insurance covers the gap between what you owe and what the insurance company will pay you if your car is considered a total loss (usually wrecked beyond repair or stolen). Gap Insurance is very affordable. You can purchase Gap protection from your lender. There are some time restrictions, so call your credit union, bank, or other lender today! Don't get turned upside down by owing more than the car is worth.

Kelly Eargle is an auto financing expert with the Credit Union of Colorado, which has a local Thornton branch. Email your question to EargleK@cuofco.org. Not all questions will result in publication.