When insuring your car you must consider gap insurance. For gap insurance is considered as a financial safety belt? For it keeps you from being financially ruined when disaster hits your car.
For example you are an situation where you bought a late-model car three months ago using a car loan with a regular car insurance. The car costs $30,000 and you have already made three payments of $900 each month. Then, disaster strikes which caused the car to be beyond repair..
Immediately, you reported it to the car insurance company, which they in turn play with numbers, mileage, depreciation, market values, and other related stuff. After a couple of days, the adjustor informs you that the worth of your car at the time of the accident is $25,000. This is the amount that the car insurance company will provide you. But the finance company that gave you the loan will still consider the car to be worth its original price. They also play with numbers, interest rates, taxes and license fees. Then they come up with the amount of $38,000. This is the amount that you need to pay them. If the car insurance company releases the $25,000, where will you get the remaining $7,000? Your car is already a wreck but you still owe the finance company a lot of money..
Immediately, you reported it to the car insurance company, which they in turn play with numbers, mileage, depreciation, market values, and other related stuff. After a couple of days, the adjustor informs you that the worth of your car at the time of the accident is $25,000. This is the amount that the car insurance company will provide you. But the finance company that gave you the loan will still consider the car to be worth its original price. They also play with numbers, interest rates, taxes and license fees. Then they come up with the amount of $38,000. This is the amount that you need to pay them. If the car insurance company releases the $25,000, where will you get the remaining $7,000? Your car is already a wreck but you still owe the finance company a lot of money..
With the gap insurance, you can ignore the difference between the amount covered by the regular car insurance and the amount you owed to the car loan company. This difference is called a “gap” and the gap insurance bridges it so that you avoid the dilemma of looking for another loan.
When you get a gap insurance, determine how much is offered in the gap policy. You should also know how much will be added to your monthly bill. A gap insurance, for it to be recognized, must be accompanied with comprehensive insurance policies that cover the accident..
A gap insurance may not be needed if the terms in your regular car insurance policy indicated that the company will pay off the full amount you owed from the car loan lender
Gap insurance is also important in case of car leasing contract.
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