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About Gap Insurance - Guaranteed Auto Protection

Unless you put a large down payment on your new car, it will probably be worth considerably less than what you owe on it.

• You should buy gap insurance either as soon as you sign the contract or within 30-90 days of purchase (or you may not qualify for the coverage).
• May be a waste of money if you have a (short-term ) 36 month loan or less.
• If your down payment was 20% or more, your gap is filled with your equity.
• Gap insurance only covers up to a certain dollar amount and percent of the manufacturer's suggested retail price of the vehicle at the time of loss.
• If you finance a lot of higher dealer profit options, even gap insurance may not cover the difference.
• There is usually no refund once your gap insurance policy has been in force more than 30-60 days.
• Without GAP insurance, you may owe the lender more than you receive from your insurance company, if your car is stolen or "totaled" in an accident.
• With GAP insurance, the insurer covers the gap between the actual cash value settlement from your insurance company and the outstanding balance on your vehicle loan.
• Many GAP policies will also cover the deductibles on your standard auto insurance policy.
• GAP insurance may be offered in your state as a commercial (group), personal or as an existing auto insurance policy add-on.
• Commercial GAP insurance protects state and national banks and credit unions from losses on financed vehicles due to thefts or accidents.
• When you finance a new car, ask your bank or credit union if they offer you a debt cancellation agreement, which may be insured by a commercial GAP policy.
• You are most likely to be offered personal GAP insurance, especially if you finance your car at a dealership.
• Choose GAP insurance before buying other options like pin-stripes or rust under coating.
• Stay focused during the negotiation process and ask if the dealer offers GAP insurance and if so, what it covers.
• GAP insurance can be a one-time premium at the time of your vehicle purchase, or rolled into the amount of your loan.
• Auto dealers can put a significant markup on your gap insurance policy. Consider an outside third party gap provider.
• GAP insurance could cost you up to 5% percent of the vehicle´s sticker-price.
• Only buy gap insurance from a licensed property and casualty insurance agent well versed in the coverage.
• When filing a claim for gap insurance, you will need to file a claim form plus a copy of the police report and a copy of your insurance company's settlement check.

Written by Craig J. Casey

Financial Writer helping people with their insurance problems on the net since 1998.

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