Gap Insurance Is Important For The New Vehicle Owner

Article Written By: RebbecaMyers

From time to time we hear the term gap insurance mentioned but most people are probably not sure what it means exactly. This coverage is specifically meant for vehicle owners whose vehicle is not worth what they are paying into it. GAP stands for guaranteed auto accident insurance protection and is useful during the early phases of a car loan.

When a person buys a new car directly from the dealer it depreciates 11% once it is off the dealer's lot. After one year it is worth 20% less than it was when the buyer first saw it. When the down payment was less than 20% and/or the vehicle has a high interest rate, once the taxes and licensing fees have been rolled into the full sum that is owed, the new owner could be upside down where they owe more than the car is worth.

Imagine if a year later there was an accident, theft, fire, flood, vandalism, tornado or hurricanes and the car is declared a write off by the insurer. The coverage company will pay the actual cash value of the car which is also listed in the Blue Book. The current Blue Book value will be less than what the owner still owes. The gap coverage will pay the difference to the lien holder and in some cases it will pay the deductible. It bridges the price gap.

Gap coverage is available for purchase from the dealership, the financial institution that holds the lien, an auto insurance company or a gap coverage provider. The owner can go online to do a cost comparison and also check with A. M. Best to make sure that the insurance company is reputable. This type of insurance can also be used to cover the gap in an RV or horse trailer loan.

Depreciation is the biggest motoring expense and much more than fuel and servicing. The second biggest expense is getting overcharged for gap coverage. It pays to shop around and compare prices. When buying the new car the buyer is so keen to drive their new car they don't read the fine print in the contract they have signed concerning the gap insurance.

Most policies have a fourteen day period where the buyer can end the policy if they so choose. Taking the time to learn about gap coverage prior to purchasing a vehicle would be the best strategy. This way the choices would already have been made before the temptation to just buy the dealer's gap coverage is done.

When purchasing a new car it helps too to research the resale value of the vehicle. Some cars do not depreciate as much as others do. Reading the car reviews will be very helpful in learning which models get consistently good reviews.

Gap insurance need not be expensive and once the buyer is out of the negative equity zone, they will no longer need the insurance. Doing one's due diligence will always help in making decisions when the time comes to make those cost effective choices. The internet makes the research easy and often there is a toll free number and/or a live chat representative available.

About the Author

You will find out more detail on gap insurance understanding accident insurance.

You Can Link Directly to "Gap Insurance Is Important For The New Vehicle Owner" by using the url:
http://www.allbestarticles.com//finance/insurance/gap-insurance-is-important-for-the-new-vehicle-owner.html

This Article Has Been Published on Thu, 8 Sep 2011 and Read 169 Times

Find All Best Articles at http://www.allbestarticles.com

Rating: Not yet rated

Comments

No comments posted.

Add Comment

You do not have permission to comment. If you log in, you may be able to comment.

Related information on Insurance

10 Approaches to Lessen Medical Health Insurance Charges
Secure Your Future with Wealth Insurance Plans
Looking For A Cheap Life Insurance Company?
Get Your Life Insurance In Order Now!
Fleet Insurance Should You Subscribe To Liability Coverage
Checking Out Details Concerning Fleet Insurance
Types Of Minibus Insurance Policy
A Catastrophic Health Insurance Plan For Everyone
Pension Plan Helps You Meet Life Security and Investment
What To Remember When Considering Of A Credit Life Insurance
Does Catastrophic Health Insurance Suit Everyone?
Gap Insurance Is Important For The New Vehicle Owner
Your assets deserve to be secure
Get On The Road With The Right Campervan Insurance.
How To Protect Your Assets Under Swiss Jurisdiction
Combi Boiler, is your insured too?
A Great Way To Obtain Company Insurance
A Cheap Insurance Quote May Help Lower The Price Of Coverage
How Let Property Insurance Can Provide Landlords With Full Protection
Five Conditions For Surgery And Office Insurance You Need To Know
A Guide To Professional Indemnity Insurance
Guide To Touring Caravan Insurance
Some Things To Know About Insurances
Insurance Options for Caravans
Whats is Professional Indemnity Insurance