Gap coverage, also called Loan-Lease Coverage, can be a super important part of your car insurance. Especially if you have a brand new car with a loan.
This article will help you understand what gap coverage is and whether or not you should have it on your auto insurance policy. So, today we’re here to talk about gap coverage.
What Is Gap Insurance? And How To Save Your Car Loan?
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Gap Coverage
Gap Coverage is really for folks who are buying new cars or cars that are close to new. Oftentimes if you look at your insurance policy you’ll see it called Auto Loan-Lease coverage.
This is coverage for the gap between what you would get paid in a total loss on your vehicle and what you have in your loan. So, let’s imagine you purchased a thirty thousand dollar brand new car.
You drove that car off the lot and six months later you got into an accident that totalled the vehicle. You may have a loan that’s worth more than the value of your car.
Auto Loan-Lease Coverage
So, let’s say when the adjuster comes out and gives you the total value of your vehicle they say it’s worth twenty two thousand dollars. Your loan is still for twenty nine thousand dollars.
You have a seven thousand dollar gap between the check that the insurance company is going to write you and what you still owe on your car.
If you don’t have gap coverage, or Auto Loan-Lease coverage, you’ll have to pay that seven thousand dollars out of your pocket.
If you have Gap coverage the insurance company will write a check for that seven thousand dollars on top of what they paid out on your totaled vehicle.
What You Should Do
So, wondering what you should do? Well, I’d go to KBB.com and find out the trade in value on your vehicle. Not the retail value, the trade in value.
That’s going to get you a ballpark idea of what an adjuster would give you if your car was totaled. Take that number and then look at the loan you have. See if they match each other.
Conclusion
If your loan is less than that trade in value, you may be OK without that gap coverage. if your loan is much more than that trade in value then gap coverage is something you should consider. Have more questions about insurance?
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FAQs
1. How many kinds of insurance are there?
There are, 4 types of insurance that most financial professionals recommend we all have: life, health, auto, and long-term disability.
2. What type of insurance is most important?
Health insurance is arguably the most significant kind of insurance. A 2016 Kaiser Family Foundation/New York Times survey discovered that 1 in 5 people with medical bills filed for bankruptcy. With a saying like this, funding in health insurance can assist you to control a significant financial difficulty.
3. What is insurance and its importance?
Insurance gives you financial support and decreases uncertainties in business and human life. It gives you safety and security against special events. Insurance gives a cover against any sudden failure. For example, in the case of life insurance financial service is provided to the family of the insured on his death.
4. Why should I get insurance?
Health insurance to cover medical expenses for you, as well as your spouse or children if you have them. Life insurance to provide for you and your family or cover your debts after your death.
5. Is driving without insurance illegal?
You can’t drive or allow somebody else to drive a car or licensed trailer on a public street unless there is insurance for third-party risk, i.e. third-party insurance that will protect damages to somebody else or someone else’s belongings.
6. What happens if you don’t have insurance?
Without health insurance protection, a severe misfortune or a health issue that results in emergency care or a costly treatment can result in insufficient credit or even bankruptcy.
7. How insurance can help me?
General insurance covers you and your assets from the financial threat of something going wrong. It cannot stop something from happening, but if something unforeseen does happen that is protected by your policy it means you will not have to pay the full price of a loss.
8. Why is health insurance so expensive?
The expense of medical care is the single biggest aspect behind U.S. healthcare expenses, accounting for 90% of spending. These prices reflect the expense of caring for those with chronic or long-term medical requirements, an aging population, and the raised cost of new medicines, methods, and technologies.
9. What are the principles of insurance?
In the insurance world, six basic principles must be met, which means insurable interest, Utmost good faith, proximate cause, indemnity, subrogation, and contribution. The right to ensure arises out of a financial relationship, between the insured to the insured and is legally acknowledged.
10. What is the main purpose of insurance?
Its aim is to reduce financial uncertainty and make accidental loss manageable. It does this substituting payment of a small, known fee—an insurance premium—to a professional insurer in exchange for the assumption of the risk a large loss, and a promise to pay in the event of such a loss.
11. What are the 7 principles of insurance?
To ensure the proper functioning of an insurance contract, the insurer and the insured have to uphold the 7 principles of Insurances mentioned below:
• Utmost Good Faith.
• Proximate Cause.
• Insurable Interest.
• Indemnity.
• Subrogation.
• Contribution.
• Loss Minimization.
12. What is the difference between travel insurance and travel health insurance?
International health insurance is created to provide a comprehensive level of health care to people relocating from their home country for a sustained period of time, whereas travel insurance provides coverage for emergency treatment while you are in another country for a shorter space of time.