Bridging the Auto Insurance Financial Gap: Insurance that Works for You
You bought a new car for $25,000, with a no down payment, 5-year installment plan. Three months later, you get into an accident while driving it. Your insurance company posits that your car lost 20% of its original value and is now worth a measly $20,000. Then, your car dealer comes into the picture. He informs you that along with the title, tax, and license fee, you most likely owe them a whopping $27,000!
You find yourself in a difficult situation now. Your insurance only covers $20,000 for something you owe $27,000 for. Sorry to sound like someone raining on your parade, but you have to know that someone is looking out for you. You have to know about gap insurance how why it can help you.
GAP Insurance takes care of the difference between what a car is worth and how much the owner owes it for. This type of insurance works best in the event of an accident involving the car, wherein the cost of repairs exceeds the actual price of the vehicle, especially if and when the owner has not completed the payments yet. This insurance plan also comes in handy for different types of car ownerships, too.
Say you own a secondhand car. Most of the time, secondhand car buyers usually end up paying more than the real price. You can be sure that GAP insurance sees to it that you are paying for what a car is really worth. GAP insurance offers coverage for second-and cars as old as 2 years.
And if your car happens to be brand new, you may be one of the many who sign 0% down finance deals. Most of the time, owners will find that their cars have depreciated within the first year. Thus, your chances of claiming the payoff value of a car involved in an accident are low.
Next, "upside down" cars. An "upside down" car is what happens when you exchange a car that owes a higher price than that of the car you exchanged it with. A finance company will let you pay the unpaid balance of the trade-in to the financed amount of your new car loan, but without the right insurance plan, you will most likely end up "upside down" in your finances.
Lastly, car rentals. In most cases with rentals, you will be held responsible for the cost of the rented car if an accident happens while you are using it. Rent payments are usually cheaper than the car's value, which presents a huge gap between what you have paid and the car's value. GAP insurance is the bridge in between.
Remember that most insurance companies will ask for your Collision and Comprehensive coverage in order for the insurance to work. They will also need you to complete all car payments until the insurance pays the benefits. You can personally look for GAP insurance through numerous car insurance companies or through the Internet.