There are several car loan products available today in the transportation industry. But for this write-up, we’ll be discussing on a particular type which some of you have probably not heard about, and that is no other than the gap insurance.
And in other to find out what this kind of insurance is, we will be answering some essential questions concerning this form of protection. So with that being said, what is gap insurance?
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What is gap insurance?
The first thing to note here is that gap insurance is only applicable when you get a car loan. If you buy a car in cash, you will never be asked to purchase gap insurance.
So, what then is gap insurance? Gap insurance is essentially an additional coverage that protects you, peradventure you get involved in an accident, and your insurance company’s cheque issued to you is not enough to pay up your car loan.
For instance, let’s say you get a car loan for $10,000 and unfortunately, maybe a year later, you are involved in a significant accident, and car insurance money paid to you doesn’t equal the car loan of $10, 000 you got for your car.
Let’s say the insurance money paid to you is $8000, which is probably the exact worth of your car. If you don’t have gap insurance at that time, you will likely have to keep paying the loan yourself or come in some agreement with your banking authorities.
Overall, even though it’s a beneficial product for some people but again, let’s keep talking about a few more aspects to it because of not everyone should get it, which then takes us to the next point.
How Much Gap Insurance Cost?
The truth here is that every institution differs, in terms of how much they charge for their gap insurance. Nevertheless, a body like credit union charges $350 irrespective of the car type, be it Mercedes or Audi.
Other companies do charge less, while some do charge more; still, they never tend to exceed $600, as long as it isn’t from the dealers. The only time it gets costly is when you’re trying to purchase gap insurance from a dealer because most of them often do charge $600 and more.
But, here is the thing about gap insurance. If you’re being charged at a meagre amount, do not put your hopes on such a company. The higher the charges, the greater the standard of insurance you’ll receive.
And in terms of payment, most companies and dealers offer two modes of payment. It’s either you pay it upfront or allow them to roll it into the loan amount.
In other words, if you want to get gap insurance, but you’re kind of sceptical about paying whatever amount they ask of you, you can include it in your loan balance. Although it isn’t a good or bad idea, I’m just letting you know that you can.
Who Should Get a Gap Insurance
This type of insurance is meant for people who are overpaying the car loans they got for their vehicle or those people that are currently in investments that are way beyond them from the look of things, to pay back.
Who Should Avoid Getting a Gap Coverage
Gap insurance is for the opposite set of people that should get gap insurance. By that I mean, if you’re driving an average or low-end car, it is pointless getting a gap coverage because obviously, your insurance company can afford to give you a cheque of let’s say $20,000 that your car is worth if it should get damaged like in an accident.
So there you have it. If you probably heard of gap insurance somewhere and never had the chance to clarify what it really means, and who or who should not get it, above lies the answers to all your enquires concerning gap coverage. And if you have a friend who’s actually into owing and driving exotic cars, you might want to introduce him/her to this very form of car insurance.