Everything You Need to Know About Gap Car Insurance
Many people don’t know what gap insurance is, let alone how it can help them. With a little more information, you might be able to see the benefits of this type of coverage for your car. Read on to learn more about this type of auto insurance, and why you need it.
This insurance protects your car if it’s stolen or declared a total loss due to an accident, fire, or other major damage. This type of policy offers you protection from being financially responsible for the difference between what you owe on your loan and the auto insurance payout.
What Are Some Benefits You Get?
You won’t be held liable for the debt or any shortfall in payments owed when your car is totaled. Instead, the remaining balance will be paid by your insurer. Your monthly premiums never increase (unlike comprehensive policies, which may have a deductible). You can choose to obtain this insurance for your car even if you don’t carry comprehensive or collision insurance.
When Can You Purchase Gap Insurance?
You can purchase this insurance at any time, but you must buy it within a specified period after purchasing your car. This is because the early stages of your car loan payoff period are the most important in terms of determining how much money your car will be worth. If you wait too long to get it for your car, you may find that your car isn’t worth as much as you had originally anticipated.
What’s The Average Cost?
You can expect to pay around $20 to $40 per month for this insurance, depending on what type of coverage you want and how expensive your car is. Be sure to shop around and compare prices from different providers to get the best deal.
Can You Purchase Gap Insurance Through Your Dealership?
Yes, many dealerships offer this insurance as an additional service for their clients, and these packages often cost more than if you were to buy this coverage from another provider on your own.
However, some people prefer buying this insurance through their dealership because they feel that it’s easier or faster. You should know that when you purchase coverage through a car dealer, all the work of filing and processing your claim will come out of pocket (and in most cases, you’ll need to wait at least a day before receiving any money).
So, if speed is something that’s very important to you, then, by all means, buy the policy through your car dealer, but know that you’ll pay a little more for the convenience.
How Does It Work?
This insurance company will pay the difference between what you owe on your loan and the actual cash value of your car in case it becomes totaled or stolen. Any money you spend for the policy is 100% tax-deductible, so consider saving your receipts and making a note of this when filing your taxes at the end of each year. You can choose to renew your auto insurance every six months to one year (it’s recommended that you do this immediately after paying off your car).
What Types of Damage Are Covered?
If you’re an insured driver and your car was damaged due to any natural disaster or catastrophe (fire, flood, earthquake, etc.), your guaranteed auto protection gap will pay the difference between what you owe on your loan and the insured value of the car.
This type of damage is usually covered by the standard comprehensive coverage that came with your mandated auto insurance policy (although this varies based on where you live). If your vehicle was damaged because of something like theft or vandalism, then only the optional collision and/or comprehensive insurance policies were taken out on that car would kick in to cover any remaining cost.
How Does Gap Car Insurance Help Me Financially?
If your car is totaled due to an accident or theft, but you haven’t yet finished making payments on it, then your guaranteed auto protection gap car insurance helps cover the cost, so you don’t have to default on your loan.
What Is the Difference Between Insurance and Loan Lease Payoff?
As an insured driver, gap insurance protects you if your car gets damaged beyond repair or stolen, whereas loan pay-off coverage protects you from being financially liable for a negative equity balance on your lease.
Is This Type of Insurance Mandatory?
No, if there’s no equity balance on your car and it can be sold at auction for what you owe on it, then there’s nothing to worry about. However, if this is not the case and something happens to your vehicle (such as theft or major damage), then you’ll probably be out a lot of money right away.
What Else Should I Know About Gap Insurance?
Gap insurance is transferable from one person to another, so if your circumstances change, this insurance can, too. If you need to make claims on your insurance, you must inform your insurer as soon as possible after the loss has occurred. Some policies might also include liability insurance, which covers financial responsibility for damage or injury sustained by other parties due to a crash involving your car.
Gap insurance provides crucial security, protection, and peace of mind for anyone who has financed the purchase of a new (or used) car, and its benefits far outweigh any small cost involved. This is something that new car buyers need to research before making their final purchase.