Automobile Gap Insurance
Automobile gap insurance is designed to cover the difference
between the “fair market value” of your car and what you owe on
it. Gap car insurance is important because it will allow you to
pay off the car in full in the event the car is totaled or
stolen. Without auto gap insurance, you would have to pay this
difference yourself – which can be thousands of dollars!
Most people buy auto gap insurance from a car
dealer, as an "add on" at the time of purchase. This is because
most people don't know they can purchase automobile gap
insurance on their own, saving hundreds of dollars.
Why Do I Need Gap Car Insurance?
Because of the depreciation factor that is inherent in all cars
new and used, the “insurance value” of a car is usually always
less than your payoff value. This is particularly true with new
cars and leased cars.
If you got in a wreck and totaled your car, it
is likely that the insurance company will only pay you a portion
of what you owe the bank. Same thing if your car is stolen. They
consider this amount to be the “fair market value”, which is
similar to the “wholesale value” of the car if you traded it
right now.
Automobile gap insurance pays the remainder of
what you owe, allowing you to pay off your loan on the wrecked
car. Without auto gap insurance, you would have to continue
making payments on a car that couldn’t be driven due to being
“totaled” or "stolen".
Here’s an example of what automobile gap
insurance does....
Let’s say you bought a car for $25,000, and after your down
payment and trade-in, you end up financing $20,000 for 60
months, and your monthly payment is around $400. A year later, a
tree falls on your car during a terrible storm, and it is
damaged beyond repair. The insurance company declares your car
“totaled” and writes you a check for $15000. You call the bank
to get your payoff, and find that you owe $16,500. This is
$1,500 less than your insurance check, and you still need to buy
a new car.
If you carried automobile gap insurance, the gap
car insurance company would pay the bank the remaining $1,500,
leaving you with no more car payments. If you didn’t have auto
gap insurance, you would need to cough up $1,500 to pay off your
loan or continue making monthly payments of $400 until the
“totaled” car is paid off. If you don’t have $1,500 to spare,
and cannot afford to buy another car while still making a $400 a
month payment for the totaled car – you’re really in a bad
predicament.
Auto gap insurance can make a huge difference
in your financial picture.
What Dealers Don’t Want You to Know About Gap
Insurance
Most people buy automobile gap insurance during the financing
phase of the car purchase. This is done at the dealers finance
office. In many cases, dealers just assume you want auto gap
insurance and automatically include it in the amount you are
financing. You will see it listed as a separate item when the
finance manager reviews the bank documents with you.
What most people don’t realize (I didn’t know
this until recently) is that you can buy automobile gap
insurance on your own, for a lot less money.
Dealers make a profit on gap car insurance, just
like they do on financing and extended warranties. Not only will
you pay at least $100 more for gap insurance if you buy it
through a dealer, but since this is usually added into your
financing, you pay interest on it too.
Buying gap car insurance on your own can
save you several hundred dollars.
Where to Buy Automobile Gap Insurance
Most car insurance companies don’t sell gap car insurance, but
you should definitely ask your car insurance provider first. Do
this before purchasing a new or used car, so you know up front.
If your insurance company doesn’t sell auto gap
insurance, you can purchase automobile gap insurance online at a
significant savings over what the dealer will charge you for it.
Below is information on where you can purchase gap car insurance
online:
GapInsuranceQuotes.com - In most states, you can
purchase automobile gap insurance directly from Gap Insurance
Quotes. This is the same type of gap insurance coverage that you
can buy from a dealer, except you’ll pay a lot less. This is the
site that offers gap insurance for a one time payment of $299,
which will save you hundreds of dollars over dealer cost. This
company covers new, used and refinanced vehicles and is approved
by the Better Business Bureau.
DriverSelect Gap Insurance - This company sells
automobile gap insurance online, with policies starting at $299.
This is considerably less than what dealers will charge you, and
DriverSelect plans even cover your insurance deductible up to
$500. You can find a lot of great information about gap
insurance on this website, as well as plenty of examples of how
it works.
Driver Select Gap Insurance is available in all
40 states. You can purchase this automobile gap insurance with a
one time fee, or set up an easy payment plan. Either way, you
will not pay extra money to the dealer for your gap insurance,
and won’t have to pay interest on financing it along with your
car.
Additional Information and Resources on Car
Insurance
Buying Car Insurance Online is Easy and Can Save Lots of Money
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