Ownership What Is Gap Insurance (And Why You May Need It)?

00:11  04 april  2018
00:11  04 april  2018 Source:   motor1.com

Low-mileage drivers are at lower risk for accidents, but they usually pay just as much for insurance, study says

  Low-mileage drivers are at lower risk for accidents, but they usually pay just as much for insurance, study says When it comes to how much you pay for car insurance, being married and having good credit often matters more than how much or how well you drive, according to a new study. The research, released this week by the Consumer Federation of America, found that major auto insurers provide little or no discounts to low-mileage drivers, even though they tend to have a lower accident risk. The study The research, released this week by the Consumer Federation of America, found that major auto insurers provide little or no discounts to low-mileage drivers, even though they tend to have a lower accident risk.

Why Buy Gap Insurance ? Gap insurance is designed to protect motorists who are what’s known as “upside down” on their vehicles, which basically means they owe more money on a given model than its actual cash value (ACV).

Gap Insurance Explained. If you haven’t come across Gap Insurance before, you might be confused about what it is. The name itself is actually an acronym which derives from the term ‘Guaranteed Asset Protection’ and it ’s designed to guarantee the true value of your vehicle (aka – asset)

Gap Insurance Lead© Motor1.com Gap Insurance Lead

It helps protect motorists who are "upside down" on a lease or car loan.

If you’re buying or leasing a new car or truck these days, you’ll likely be offered – perhaps required to purchase – so-called gap insurance. This type of policy covers the difference between what a given vehicle is worth and what the owner or lessee still owes on it, should it be stolen or become totaled in an accident. For the record, “gap” stands not for the above imparity, but for Guaranteed Auto Protection.

Gap insurance is becoming increasingly essential for consumers who finance their rides for extended periods and with relatively low down payments to keep their monthly payments affordable (loans as long as seven or eight years are becoming increasingly common). And it’s a necessity to those who lease a new car or truck.

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As the name suggests, this type of insurance closes the gap between what you owe on a car and what it is worth following total loss or a theft. You may think that you don’t need gap insurance , but without such coverage you could be left holding a hefty bill.

Gap insurance and loan/lease coverage may be the 2 most important car insurance coverages you 've never heard of. Some drivers assume comprehensive and collision coverage offers full protection if their car is stolen or totaled.

Why Buy Gap Insurance?

Gap insurance is designed to protect motorists who are what’s known as “upside down” on their vehicles, which basically means they owe more money on a given model than its actual cash value (ACV). To an insurance adjuster, this represents the price of the car or truck when it was new, minus depreciation, and accounting for mileage, its physical condition, and other considerations.

If a vehicle is financed and it’s stolen or totaled in a wreck, the insurance company will only reimburse the owner for its ACV, and not what he or she paid for it. Since a new vehicle tends to depreciate rapidly once driven off a dealer’s lot – the average model loses around 19% of its original value after one year, and nearly half after three years – those financing for extended periods may find themselves having to come up with a sizeable wad of money to the lender. This situation only gets worse if the car has an inherently lower-than-average resale value.

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  Consumer Group Blasts Auto Insurers for Paltry Low-Mileage Discounts You might think your car insurance company will give you a price break for driving less. But not all insurers offer discounts to low-mileage drivers. On average, folks outside of California save $30 per year, or 1.6 percent, for every 5,000 fewer miles driven. That’s compared with an average savings of $81, or 8.7 percent, in California — which is an exception because its regulations require insurers to charge lower-mileage drivers less.Analyzing mileage discountsFor its research, CFA got premium quotes for basic liability coverage in 12 different U.S. cities — one in California, and the rest elsewhere.

Gap Insurance : What Is It and Do You Need It ? Gap Insurance and Leasing. In the case of a lease, even though you aren't buying the car outright, you are responsible for the cost of the car if it is stolen or totaled.

It ’s annoying to know that the moment you drive your brand new car away from the dealership its value drops significantly. The drop doesn’t end there either. Findings published by the AA show that, on average

Experts say you should consider buying gap insurance if you’re making less than a 20% down payment, and/or are financing a car or truck for 60 months or longer.

How Gap Insurance Works.

Let’s say your car cost $36,000 when new, and you currently owe $32,000 on it. If the ride is declared a total wreck and its ACV for insurance purposes is $26,000 and is subject to a $1,000 deductible, the insurance company would offer you a settlement of just $25,000. Gap insurance, assuming you’ve purchased it, would cover the outstanding $7,000 you’d otherwise owe the financing company.

You can either buy loan gap insurance from a new-car dealer or an insurance company, though not all providers offer it in all states. Since both costs and terms can vary from one company to another – some policies, for example, cover the comprehensive and collision deductible – be sure to shop around if you’re looking to add this component to your policy. According to insurance industry sources, car dealers reportedly charge $500-$700 for gap coverage, while some credit unions and insurers might offer it for around $200-$300. Some insurers will bundle gap insurance as part of their extra-cost new-car replacement coverage, and you can either purchase coverage up front or add it onto a policy later.

Good driver, bad credit: What makes your car costs so high

  Good driver, bad credit: What makes your car costs so high Car owners with poor credit can pay hundreds — if not thousands — more to drive than those with good credit. This plays out in two important ways: higher rates…To see how much poor credit can cost car owners, NerdWallet looked at auto loan terms and insurance quotes for drivers in different credit tiers.

Gap insurance comes what is gap and why might you need it ? Pays off its actual cash value, giving the 12 grand to cover your loan, leaving minus do i special auto coverage if my car's leased or financed? .

That is why many car insurance companies offer gap insurance (loan/lease payoff insurance ) as an optional You cannot get gap insurance for lines of credit that may be used for purposes other than a vehicle. Tell us your thoughts. Leave a Comment. 112 Responses to " What is gap insurance ?"

On the other hand, if you’re leasing a new car or truck, the leasing company or automaker’s financing division may not only require gap insurance, but will simply build its cost into the agreement.

Gap insurance is essential here because a new-vehicle lease is virtually unbreakable. Whether the car is totaled or the lessee can no longer afford it because of a loss of job or divorce, the lessee is still liable for the aggregated cost of all scheduled payments. Here again, the difference between what the lessee still owes on the contract and the vehicle’s ACV can be substantial, especially if the automaker originally “subvented” the deal by artificially inflating the car or truck’s resale value or applying a hefty cash rebate to the transaction to help move the metal.

And, though we hesitate to overstate the obvious, if you own a car or truck free and clear or it’s worth more than you owe on it, you don’t need gap insurance.

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Consumers have ranked these car insurance companies highest based on customer satisfaction. How does your auto insurer compare?Here’s some good news about car insurance for a change: Folks are more pleased with their insurance companies than ever.

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