How Gap Insurance Coverage Can Protect Automobile Owners

What Gap insurance is And Why You May Need It

GAP is the acronym for Guaranteed Auto Protection, it expands the coverage on your automobile insurance policy to cover you for the value of your car loan rather than the cash or "book" value of your car. Car owners who need it are those who owe more on their car than the cash value. The minute you drive your car away from the showroom it depreciates by 9 to 10 percent. This means that if you have financed your car, it is most likely worth less when you get it home than when you signed the sales agreement, If you owe.

Say you bought a car for $32,000 and put 5 percent down, your loan is in the amount of $30,400. As you are driving home a car runs a red light and T-bones you, crashing hard into the side of your car. He is uninsured and your insurance company declares your car a total wreck.

The "book value" for your car is $28, 800 but you owe the finance company $30,400, or $1,600 more than you are covered for. Unless you have GAP insurance you will have to pay that $1,600 out of your own pocket. Should you have purchased GAP insurance? Yes as the premiums are miniscule compared to your out of pocket expense.

When You Don’t Need Gap Insurance

Don’t fall into the trap of buying a product you do not need though. Basically there are only two reasons to carry GAP insurance.

  1. When you owe more on the car than it is worth
  2. If you are leasing a car

Most other times you do not need GAP insurance coverage for your automobile as there is nothing it will protect you from.

Had you put down a larger down payment, say 10 percent in the above example, your insurance coverage without GAP coverage will pay the total that you owe, so no need for GAP coverage.

Likewise, if you bought an old car from your uncle for $500 there really is no reason to buy GAP insurance. Frequently finance companies will add GAP insurance to your loan, check with your insurance agent to see if the insurance company can provide it for less.

Leased Cars – Smart Decision

Did You Make A Smart Decision?Considering the high gain in car prices and the shine in the status of the economy today, so more people have begin to think leasing a car instead of buying a new car. Inspite of the lucrative good deals offers by car dealers to the customers, the sum of leased cars is on a boost due to its intact benefits. Auto dealers gets leasing as financially attractive, and also fits tremendous change in lifestyle. The choice is very personal. Arranging for a good lease insurance out of your vehicle insurance representative is extremely important. On the other hand, common leasing insurance does not take care of all sorts of things. You will find there’s difference regarding the worth of your leased car and the sum you’ve spent on the car.

Leased Cars – GAP Insurance

The auto leasing company may also require Guaranteed Auto Protection or “GAP insurance” as it is commonly called. In case of leasing, the cost of gap insurance is generally included in the lease payment since the auto dealers generally buy a master policy from an insurance company to cover all their leased cars. The insurance company pays on the basis of the car’s actual value while taking the depreciation into account. The difference between them is known as the ‘gap’. However, there is no obligation on your part to agree to have GAP insurance included in your lease agreement.

Collision Coverage and Comprehensive – Protects Your Leased Car

The auto leasing company would want you to have both collision coverage and comprehensive. In instance of tree falling, theft, vandalism, fire or of any damages this comprehensive coverage will save your leased car.

In the case of any car accident this collision coverage will save your car in lease. If you clash with stationary object or a another vehicle, your coverage as collision will save your car. The deductible go together with collision coverage and comprehensive. The deductible is the sum that you need to pay out of your pocket before your insurance company starts to charges in.