Auto loan gap insurance: GAP covers mainly used on a new and old vehicle such as cars and trucks.Gap auto insurance is specifically used on new and used small vehicles (cars and trucks) and heavy vehicles. a few financing businesses and hire contracts require it.GAP Insurance also termed as GUARANTEED ASSET PROTECTION INSURANCE. It was established in North American financial industry.
WHAT IS GAP INSURANCE?
GAP Insurance also termed as GUARANTEED ASSET PROTECTION INSURANCE. It was established in North American financial industry. It protects the borrower if the car is totaled by the paying the remaining difference b/w the actual cash value of a vehicle and still owed on the financing.
Some GAP policies also cover deductible.
Two types of getting GAP coverage
- An insurance policy sold by broker .
- A waiver agreement sold by a finance and insurance Manager.
The first is regulated by insurance industry and the second is unregulated. In either case coverage is usually the same and sold as a soft product through the car dealership .
HOW GAP INSURANCE WORKS?
Lets take an example you bought a brand new car for 25,000$ . you still owe $20,000 on your auto loan when the car is totaled in a covered collision. Your collision coverage would pay your lender up to the totaled car depreciated value- say its worth $19,000.
If you don’t have GAP insurance , you would have to $1000 out of your pocket to settle auto loan on totaled car.
If you have GAP insurance , your insurer would help pay $1000.
Keep in mind that , in the above example, the car insurance goes fully to your auto lendet to pay off a car that’s no longer able to drive .
CAN YOU GET GAP INSURANCE AFTER YOU BUY A CAR ?
YES, you may be able to get a gap insurance after you buy a car, depending on the model year of the vehicle . Many insurers offer gap insurance as part of a car policy.
Some insurers may require a vehicle to be a brand new in order for you get gap insurance . that’s mean
- That you are the original owner of vehicle
- The vehicle is not older than 2 to 3 model years .
Check your insurer first that what are his requirements
GAP insurance also covers the amount on a loan that is the difference b/w the amount owed and the amount covered by another insurance policy.
When you need GAP insurance
Gap coverage may apply if you are in stress on your auto loan when your vehicle is stolen or totaled. Totaled means when repair costs is increasing than the value of the vehicle.
Is Gap insurance worth it?
Before buying Gap insurance you have to know about this type of coverage because this type of coverage may only be available if you are leasing or financing a new vehicle. Then, think about how much you owe on your vehicle loan verses the value of your car.
You need gap insurance in following situations
- If you made <20% down payment on your vehicle.
- If your auto loan 60 months or longer
- If you are leasing a vehicle
From all of above scenario of auto loan gap insurance we conclude If you’ve had the longest drive, it can be even worse. When the insurer pays a solution for a car that is a total loss, you have to pay the current value of the car - and cars are known to quickly lose value over time. After a year or so, you could end up getting half of what it really paid for it. Where your car is a total loss, the insurance ‘Gap’ (short for protection of guaranteed assets), is designed to work with your car insurance standard - filled the gap between what they will pay, and what you really need to Back on the road.