Is Gap Insurance Included In Full Coverage – GAP insurance isn’t for everyone, but if you’re financing a car, it can make all the difference. Assured asset protection, to use its full name, is an optional product that protects your finances if your car is stolen or totaled in an accident. Car insurance covers the market value of the vehicle, but if you owe more than that on your loan, GAP insurance can cover the remaining amount and save you from dipping into your own pockets.
Cars, as you may have heard, are easy to depreciate and wind up on your finances. This is especially true for new cars, which slow down by 20 percent in the first year. Negative equity also occurs if you make only a small down payment to cover depreciation or, for example, opt for a long-term loan.
Is Gap Insurance Included In Full Coverage
When you buy a car from a dealership, it’s common for GAP insurance to be offered along with other optional extras when you sit down at the F&I office to pay for the vehicle. If you are financing your purchase, you can choose to include GAP insurance in that financing. What if you are pre-approved for a loan? These types of lenders allow you to add this product if it suits your approved loan amount. You can also purchase GAP insurance from most insurance companies, so it may be possible to include it in your coverage.
Where Can I Buy Gap Insurance?
When approaching the car buying process, it’s helpful to look ahead to life down the road of vehicle ownership. If your car is ever totaled, GAP insurance will be your financial need.
With over 10 years of experience in auto financing, Rob Looker helps car buyers find the right vehicles with the right financing so they can enjoy the road ahead. When he’s not creating content, he’s often behind the wheel, researching new…Many new car buyers believe that the insurance company is not obligated to continue paying their car loans when their vehicle is paid off. Unfortunately, this mistaken belief hooks many car owners into underwater auto loans after a total loss.
After a car accident, Texas law allows the victim to recover compensatory damages from the at-fault driver and the driver’s liability insurer. Damage compensation puts the victim in the same position as the victim would have been had the collision not occurred. With respect to property damage, that means compensating for necessary repairs or getting compensation for the fair market value of the vehicle.
The market value of a vehicle is the price it would fetch if offered for sale by a willing seller and bought by a willing buyer. If the cost of repairs is relatively close to the vehicle’s market value, the liability carrier will “total” it. Totaling a vehicle means that the insurance company chooses to reimburse the owner for the car’s market value instead of paying for its repairs.
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When an insurance company buys a vehicle, the fair market value of the vehicle is the only relevant matter; The loan balance is irrelevant. Unfortunately, the value of a vehicle depreciates significantly in the first few years after purchase, consumers often finance new car purchases, and lenders sometimes require little or nothing further. These three situations cause many new car buyers to be “underwater” on their car loan as soon as the vehicle drives off the lot.
Gap insurance (also known as loan write-off) covers the difference between what a person owes on a vehicle and the vehicle’s value if the insurer buys the vehicle. In Texas, consumers can purchase term insurance from an insurance company or through a dealership. Texas law does not require car buyers to purchase gap insurance, and auto retailers do not require gap insurance as an auto loan condition.
Suppose a person buys a new car. A few months later, the driver negligently crashes the car, and the at-fault driver’s liability insurer decides to total the car rather than reimburse the owner for repairs. At the moment of fall:
Under these facts, Texas law entitled the car owner to recover $16,000.00 in property damage compensation. It does not matter that the $16,000.00 does not fully satisfy the owner’s loan balance. What happens to the $4,000 “gap” depends on whether the owner has gap insurance. If the owner has gap insurance, the owner will pay the difference to pay the $20,000.00 auto loan – $16,000.00 from the liability carrier and $4,000.00 from gap insurance – and suspend future payments. If the car owner does not have gap insurance, the owner must continue to pay the $4,000.00 balance to the lender even though the owner no longer owns the vehicle.
What Is Gap Insurance And How Does It Work?
The bottom line is that car owners who owe more than the value of the vehicle should purchase gap insurance immediately. Every day, Texas car accident lawyers hear stories of car owners who chose not to buy gap insurance, who are underwater on their loans and stuck with car payments they don’t own. While it may be possible to convince a property insurance adjuster to slightly increase the value of a vehicle, it is difficult – if not impossible – to help someone avoid paying a large gap.
If someone’s negligence injures you or a loved one, you have a lot to worry about. Don’t let property damage management and insurance adjustments be one of them. We work with the insurance company so you can focus on getting your life back to normal. You have one chance to do this; Make the right choice by choosing the right lawyer. Call us at (956) 291-7870 or email us at [email protected] for a free consultation and case evaluation. “Gap” is an insurance industry acronym for “Guaranteed Auto Protection.” Gap insurance compensates the car owner when the total loss payment is less than the outstanding loan or lease balance. Gap insurance covers the difference between the depreciated value of the car and the loan amount if the car is involved in an accident.
If you are financing or leasing a car without a down payment, the amount you borrow may be more than the total value of the car. If the car is totaled in an accident or stolen, standard car insurance will only pay up to the present value, which may be less than the outstanding loan or lease amount.
Gap insurance is a supplementary auto policy that covers any difference between the vehicle’s current insured value and the loan or lease balance. If the vehicle is totaled or stolen before the loan is paid off, gap insurance covers the difference between the car insurance payment and the loan amount on the vehicle.
Gap Insurance In Colorado
If you’re financing a vehicle purchase, your lender may require you to have coverage for certain types of cars, trucks, or SUVs. Specifically, this includes vehicles that depreciate and lose value at fast rates, such as luxury sedans or SUVs.
Some dealers offer gap insurance when you buy or lease a vehicle. However, compare that to the costs that traditional insurance companies may charge.
It is easy for a driver to owe the lender or leasing company more than the car is worth. A small down payment and a long loan or lease term will delay the equity in the vehicle. The current value of the car is not the price you paid, but your regular insurance will pay if the car is totaled. However, cars depreciate quickly. An average car loses 10% of its value in the first month after purchase.
Your policy will not pay the cost of replacing the car with a new vehicle. In a trade-in car you will be reimbursed for a comparable car to yours. Insurers call this the actual cash value of the vehicle. Because payouts are based on actual cash value, not replacement value, gap insurance helps minimize your financial losses.
The Best Gap Insurance Coverage Options
If you have gap insurance, check your loan balance frequently and cancel the insurance when the balance is less than the book value of your vehicle. Use the National Automobile Dealers Association (NADA) guide or Kelly Blue Book to determine your car’s value.
You bought a new car with a sticker price of $28,000 with 10% down, so your loan cost is $25,200. After 12 months, you have paid $5,040. You still owe $20,160.
In one year, the car is totaled in a traffic accident and the insurance company calculates the current value of the vehicle. Like the average car, your car is now worth 20% less than what you paid for it a year ago. That’s $22,400. The coverage will reimburse you enough to cover the car loan balance and give you $2,240 to purchase a replacement vehicle.
But what if your car is one of those models that doesn’t hold its value? If you have downgraded your car by 30% after buying it,
