Closing the GAP in Coverage: GAP Insurance Explained
If you are buying a new car or considering it through a loan of any type, you probably have been or will be offered GAP insurance by the dealership that sells you the car. Buying GAP coverage (and having the price rolled into your vehicle purchase) may seem like a good idea at the time but you can get lower rates by shopping around.
What Is GAP Insurance?
This is a special type of insurance that does not usually require monthly payments like ordinary auto coverage does, you often pay a single lump sum when buying the vehicle or buying the insurance and your vehicle is covered for as long as you owe money on the loan for the vehicle. What this coverage does, if you are involved in an auto accident that destroys your vehicle, your standard coverage on the vehicle will pay you what the vehicle is currently worth…that is very likely to be less than you actually owe on it. Hundreds of people are shocked, dismayed and very upset by this cold reality every year when they find themselves still saddled with hundreds or thousands of dollars on a payment for an automobile they don’t even have anymore. GAP coverage is designed to close that “gap” and will pay the difference between what you owe on your car and what the insurer pays you if your car is ever destroyed.
Find GAP Insurance at the Best Rate
Since this type of add-on is usually a “buy and forget” type of process, many people are often suckered into just buying it while they are at the dealership purchasing their new car. What’s an extra $1,000 or so when you’re already spending $25,000 or more on an average vehicle in America? Well that extra money means more car payment that you will be stuck with for five years or longer and you don’t have to. The price ranges wildly from very inexpensive to exorbitant based on little actual rhyme or reason whatsoever. Businesses charge what they think they can get away with and – along with many other things – auto dealerships believe they can get away with a lot. You can probably get lower rates for this protection by shopping around at various businesses that offer it.
When shopping this protection, make sure you are getting what you pay for. That the insurer will, without hassle, cut your auto lender a check for the precise amount (no remainder for you to handle, no matter how small) of your remaining note after your insurer has paid off their part. This coverage is completely unnecessary if you are buying a car for cash or putting down a large down payment (at least 20%) that will likely keep your car’s value higher than what you owe on the loan.