You may encounter finance managers in car dealer shops selling GAP insurance to its consumers. It is an insurance that covers the difference between what you owe on your car and its total value when it is “totaled” in an accident, stolen, or damaged by catastrophes such as flood, fire, or storm.
Most car owners who are paying for their cars owe more on their vehicles than their car’s actual value. This is particularly true in trading vehicles you still owe money on. After undergoing some cycles you will eventually find out that your car’s value is hopelessly higher than what you owe on it. If your car gets totaled in an accident, damaged by a catastrophe, or was stolen, and the auto insurance company declares your car a “total loss;” then your car becomes the insurance company’s property. However, take note that the amount of money they will give as “help” to replace your car is only equal to the actual market price of your car. To top it off, you will stay pay the amount you owe on that car though your car dealer.
A recent study shows 38% of trades in the car industry are “Upside-Down” and more and more people are becoming ignorant that there are possible ways of preventing this. One answer is getting GAP insurance to support your auto insurance policy. When left to pay for a vehicle you do not own anymore, GAP will cover this “GAP” between your car’s market value and money you still owe on it.
However, you would not want to get GAP insurance from your car dealer because they will offer prices of up to $1000 over the cost of your own insurance. News reports say car dealers profit a fortune when they sell GAP to their customers.
To prevent this, search for companies that offer GAP online. This process is similar as when you looked for auto insurance quotes online. Browse different websites that may give good offers and choose which one is best. If possible, search for forums and discussions regarding insurance providers and find out whether they give good services to their clients.
Although GAP insurance is a must for those who buy cars, it is equally important to people who lease. Besides, it actually originated from car leasing. This “Upside-Down” situation is a more complicated experience than just purchasing or leasing a vehicle. It is like spending money for nothing because you do not own the car anymore. Just know where to find the right help and assistance to avoid such an experience.