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Gap Insurance

Gap insurance coverage | For auto gap insurance discount providers check out companies listed here as authorized insurers. Gap insurance coverage is available from many standard carriers who offer insurance for your auto. Gap insurance coverage can be purchased relatively cheaply and may provide you with both financial protection and peace of mind.

What is gap insurance and what is gap coverage. Gap insurance is a supplementary coverage, principally for those who have taken out an auto loan and is designed to provide financial protection for your loan liability in the event that the vehicle is totaled or stolen. Gap coverage is relevant when the current value of the auto is less than the outstanding value of the loan.

auto gap insurance coverage

Many consumers make the false and incorrect assumption that if their auto is written off or stolen - but they have a fully comprehensive policy - then their insurance will pay out to clear the outstanding loan balance where necessary. In fact, a standard auto insurance policy will payout the actual cash value, regardless of outstanding monies which may be owed.

auto gap insurance coverageThe relevance and importance of what is gap insurance coverage becomes clear when we consider the simplest gap insurance scenario, of a brand new (unused) vehicle financed with an auto loan (as distinct from a lease). Once the owner pulls off the lot, the actual cash value of the vehicle drops by a hefty percentage, potentially equivalent to thousands of dollars.

 

If the auto is later totaled or lost, the standard policy insurer is going to pay the depreciated value of the auto, less your deductible, leaving you liable for a potential shortfall of thousands of dollars from which to repay the original borrowed sum outstanding.

Gap insurance coverage is designed to protect your finances against this negative equity situation, and although it is potentially relevant to any auto loaned purchase, gap insurance coverage is especially relevant to the new vehicle scenario due to the vehicle's great initial depreciation which leaves you "upside down" on the loan.

The negative equity need for gap insurance is further worsened where the consumer has overpaid for the auto, failed to make adequate down payment, traded a vehicle carrying a negative balance or financed with a long loan period.

The gap insurance question is simple: What is the vehicle's actual cash value versus the loaned amount still owed. How does gap insurance work? Gap insurance works per this example: Assume you buy an auto for $35,000 by means of an auto loan. Three months later the vehicle is totaled or stolen without trace. The actual value of the auto at such time is $28,000. Your comprehensive auto insurance pays you $27,000 ($28,000 minus your $1,000 deductible). At the time of loss you still owe $33,000, leaving you $6,000 short. Gap insurance coverage steps in to payout this shortfall (the amount for deductible may or may not be included in the gap insurance coverage depending on policy). Gap insurance is it worth it? The above may help you decide. Some auto dealers offer gap insurance deals. It is not advisable to purchase gap insurance from a dealer, rather to buy from an approved standard insurer found here online. Many standard insurers offer gap coverage (but not all). A free quotation for gap coverage may be obtained directly from such. In simple terms, the question is gap insurance worth it can be answered by a look into your vehicle's actual current value compared to your outstanding loan. If the difference is sizable (as in the above scenario), then you may want to get some free quotes here. Gap insurance and often cheap gap insurance coverage may not only protect your finances, but afford good peace of mind. One may check out better discount quotes direct from insurers here online.











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