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Information on Auto Gap Insurance
Auto Gap Insurance was established
in the early 1980's to provide protection to car buyers as the gap between the rapid
deprecating value of cars and the balance owed increased. The escalating price of cars,
extended term auto loans, and the increasing popularity of auto leasing gave birth to auto
gap insurance (GAP- guaranteed asset protection)
Upside down, negative equity, buried...there are many terms used to
describe this situation and quite frankly it is very common.
A type of insurance offered to auto lease and loan customers
that owe more on a car than it's worth. Gap insurance pays the difference between what you
owe and the actual cash value of a vehicle in the event the car is stolen or destroyed.
Is an auto gap insurance policy necessary?
It can be, standard comprehensive and collision auto policies only cover your new car's
"fair market value". And that can be as little as 80% of what you paid for your
car, starting the minute you drive it off the lot.
This means that if you're involved in an auto accident that leaves your new car
"totalled", or if your car is stolen, you could end up paying off a loan blance
left after your insurance pays the "fair market value" which could be several
thousand less than what you owe.
That's where guaranteed asset protection (GAP) insurance protects you.
Gap insurance policy protect you having to pay the difference between what you owe on your
car and what your insurance company says it's worth.
If you're leasing your car, the leasing company probably requires gap insurance as well.
You may have it and not even know it, you may be over paying for it and not know it. Read
you current policy and (or) contact your lending institution and insurance agent to find
out.
If your car is stolen, loss is the same if not worse as in the case of an accident. Comprehensive
insurance will cover the value of the vehicle, but not necessarily all of the loan that
you owe to the bank. You could be stuck paying thousands for a car that's long gone.
Auto gap insurance is not something you'll need for the entire loan period, but for the
first few years of ownership, it will protect your assets.
Finding the right gap insurance policy
Dealerships and auto lessors offer gap insurance policies. If
you buy it from them you will pay too much.
You're much better off finding your own gap insurance policy. Search Google for Auto Gap Insurance for the best deals.
( 9 out of 10 people have not
heard of auto gap insurance )
Example
| Your Loan Payoff |
$20,000.00 |
| Your Vehicle's Actual Cash Value |
$15,000.00 |
| Your Deductible |
$500.00 |
| Your Insurance Settlement |
$14,500.00 |
| The Gap |
$5,500.00 |
| Gap Insurance pays |
$5,500.00 |
| In the above example your auto
insurance company would generally pay the Value of Car making you liable for the
Negative Balance amount "the gap". You would need to pay this
amount in cash, credit, or you can try to make an arrangement with the lender to make
payments. Many banks would want to see this amount paid before they would be willing to
lend you money for your next car. Some dealers will finance this "Gap" back into
your new car loan, a bad idea since now you pay interest on the negative balance of which
creates an even "BIGGER GAP" negative balance on the car your now driving.
Please don't do this |
AUTO GAP INSURANCE
protection would pay the $5500 freeing you of any more financial obligations and allowing
you to replace your wrecked or stolen vehicle.
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