What is GAP Insurance?

GAP insurance is intended to prevent you from making payments on a vehicle that is no longer drivable.

With the value of today’s automobile dropping faster than the Dow, it is very easy for consumers to get upside down on their car payments.  Most auto insurance policies only cover your car at market value and GAP insurance is an inexpensive way to cover that difference between what you owe on your vehicle and what the insurance company will pay you.

If your vehicle is totaled due to accident, flood, tornado, vandalism, or theft, your insurance company will typically pay the market value, which is often considerably less than the actual amount you still owe on your loan or the amount due for a lease payoff.

The amount between your insurance deductible and the loss from this financial shortfall is the “gap” you can be left owing.

Claims scenario:

• Buy a car that costs $30,000 and you drive it off the lot.
• After making the down payment, you owe $28,000 in car payments over five years.
• You purchase an insurance policy with a $1,000 deductible.
• You have an accident and the vehicle is totaled, but the value of the car is now only $25,000.
• You still owe $28,000 on the vehicle and the insurance policy pays $24,000 ($25,000-$1,000 deductible).
• You have a gap of $4,000 that you still owe on the car.

If you would have purchased GAP insurance, you would owe nothing at this time.  GAP coverage would pay the difference.

How much does GAP insurance cost?  GAP coverage on this vehicle would have been approximately $16 for the year!

To find out the cost of GAP insurance on your vehicles, please call us at (913)-322-7785.  Ask for Mary or Nate!

Visit us at http://goveainsurance.com

 

Bo Govea

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