Cars are good for transportation, but they are terrible investments. It is by no means clearer than when you total your car in an accident. You bought the shiny new Ford Fusion for 20,000 a few years ago, but you only received 10,000 from the insurance company for that. Even worse, youre still guilty of 13,000 on the car loan.
What about it?
Gap insurance could have made the difference in this scenario, but more options are available.
What is Gap Insurance?
Sometimes called loan leasing gap coverage or up and down insurance gap insurance is a specialized form of auto insurance that is designed to do one thing and one thing only make the difference in what you bought your car for and what the insurance company pay for it in the event that it is a claim. It is traditionally sold for a single premium usually around 300 to 700 by a car dealer at the time of signing.
Yes, the auto dealers finance manager is also an insurance agent. Type. He is usually licensed to sell the divide insurance and something else called credit life, which I do not get into here.
Understand the terminology behind Gap Insurance
In order to better understand how gap insurance works, you should first understand some basic insurance terminologies. Car insurance is designed to repair or replace losses incurred to your vehicle in such a way that you do not earn or lose from the deal. This idea is called compensation. Damages are probably the only most important concept behind all insurance, not just car insurance. An example of a large insurance company recently referred to compensation by using the slogan getting you back to where you belong.
In case of compensation, the insurance would be easy. Of course that is not the case. There are also other factors to consider. For example, insurers must know what caused the cause of your loss. This is known in the industry as the risk. Examples of hazards that are common in car insurance include vandalism, theft and auto glass damage due to missiles, ie. stones.
Stay with me here.
Certain hazards are not specifically covered by car insurance. These are called exclusions. Common exclusions in auto insurance include intentional damages and depreciation. By definition, exceptions are specified specifically in your insurance policy.
Heres how gap insurance is recording. Everyone knows that car values are deteriorating over time. Depreciation is a danger as it causes a significant loss for your vehicle. However, as depreciation is an exclusion in your policy, your car insurance is not covered. Therefore, this is the reason for the occurrence of gap insurance. Stick with us and you will pass the insurance license test in any country in the country.
Do you really need Gap Insurance?
Many people jump over the insurance cover, because its obvious they think its just another boondoggle that car dealers use to set their pockets. Its not necessarily true, but its not necessarily true that you always need it. What is necessarily is that you want to talk to your insurance agent before signing a closing document on a new car.
Chances are you will fund the new car you just bought, which means you should wear full coverage on the vehicle. You do it for no other reason than the bank will do you. Not doing it will force them to force full coverage insurance on your vehicle. You do not want to do it.
However, you want to see if your full insurance insurance includes insurance coverage as either an option or as a standard feature. Many companies offer this. In addition, more and more companies are able to replace a total vehicle with a new one within a certain period of time.
Although the depreciation statement is still on auto insurance, insurance companies are still sensitive to these issues, not to eager to keep your business by offering more bells and whistles.
But if your car insurance does not offer any of these features, you want to do one of two things, get another car insurance company or continue and take the gap insurance. The only thing worse than being up and down in a vehicle is up and down in a ruined one.