DON’T FALL IN THE GAP
Posted on Jan 30, 2015 by InsuranceCalls Company
A purchased or leased vehicle starts depreciating in value once it leaves the car lot. Up to 20% of value can be lost within one year. The amount of a loan, when financing a new car using a minimal down payment, will most likely exceed the market value of the vehicle in it first few years. If your vehicle is evaluated as being totaled by your insurance company, in the event of an accident, they are only liable to cover the current market value of your vehicle. Luckily you have the option of covering the “gap” between what you owe and the current market value of your vehicle with GAP Insurance.
2012 vehicle cash value: $25,000
Loan balance: $27,000
Payoff without GAP: $25,000 you owe: $2,000
Payoff with GAP: $27,000 you owe: $0
You will most likely be offered GAP Insurance or GAPS at the car dealer but are better off buying the coverage from an insurance agent who can offer it at a better rate. Typically, adding GAP insurance along with collision and comprehension would only increase your rate by about $20 a year. Requirements involved in purchasing GAP insurance and maximum loss limits for GAP to kick in vary from state to state. The Truth in Lending Act, which promotes the informed use of consumer credit, excludes GAP premiums from financial charges if it was not required by a creditor, premiums were disclosed in writing and the consumer can provide a written request for the coverage.