Learning about “Gap”
There are times when people often wonder why their insurance companies do not help them even though they applied and paid for “full coverage”. The simple reason for this is that full coverage does not actually mean full. It just means extended. Usually, full coverage usually includes accident and non accident events. They do not mean that they will be paying for all damages. The amount that they will be going to pay depends on your agreement. It is important to this to be aware and not taken off guard by our circumstance.
We should also know that a car’s value depreciates as time goes by. This means that the actual value of the car goes down with time. This means that when you bought a car at $40,000 then after some time its actual value drops to $38,000. This continues on until the value of the car practically becomes negligible. There are times when individuals have not even finished paying their financers then they get into an accident leaving them “upside down”
Upside down means that you owe more on the car than what it is actually worth. This happens when a relatively new car gets into an accident that the damage was so severe that the insurance companies that you are working with determines that they actually need to pay for the whole car. If you bought a car at $40,000 then its actual value depreciates by $5,000 dollars. Chances are that the company will only pay for $35,000. Basically what happens here is that you still owe $40,000 that is $5,000 less than its actual price.
Gap protects clients from these kinds of events. Gap, as related to what we are talking about, means the difference of the actual value of the vehicle with its retail price. Those without the gap coverage will be forced to pay for this difference from their own pockets since most quotes only pay for actual cash value of the vehicle. Gap coverage will pay for what is lacking and sometimes, they even pay for the deductibles.
This protects clients make sure that they are really covered. The gap insurance is also called the loan/lease gap insurance because it helps clients that own the vehicle but have not yet paid their balance. The terms and conditions with gap are not always absolute. You need to talk to your providers to really understand how gap works and how it will work for you.