Consumers can benefit greatly from gap insurance on their vehicle purchases as long as they know it exists.
According to leaders in the auto industry, though gap insurance may be familiar to individuals who have leased cars in the past, to everyone else, they may not realize the advantages that it can provide when they purchase a new vehicle with financing that includes low monthly payments.
Also known as guaranteed auto protection, this coverage is meant for the difference between what is still owed on the loan for the vehicle, and what it is actually worth should it ever need to be entirely replaced. This can be highly beneficial to consumers, especially in today’s economy when car dealers are offering special low payment opportunities in order to bring customers in through their doors.
According to Edmunds.com features editor, Carroll Lachnit, “For new car buyers, there are a lot of deals that are no-money-down kinds of arrangements.” Lachnit also went on to say that “When you drive off the lot, there’s pretty much an immediate drop in value. Depreciation in the year is about 20 percent.”
Standard car insurance will pay for the car value, but that may not pay off what is still owed to the financer.
When consumers purchase this type of policy, then they will have coverage in case the car is every stolen or totaled and the value of the car – which is paid by the regular auto insurance company – is less than the amount that is still owed on it due to its immediate depreciation. It means that this extra amount will be covered and won’t need to come directly out of that driver’s wallet.
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Though this coverage is typically required for people who lease their vehicles, in a buying environment such as today’s – with low monthly payments and a long period of time to pay off the vehicle, in which time the value continues to drop – this type of added protection can be very helpful.
Most experts recommend gap insurance unless a large down payment is made.
Bill Pearse, from Bankrate.com and Travelers Insurance vice president of auto product strategy said that this type of gap insurance coverage is important for anyone who still owes a significant amount on a vehicle.
Article: Auto gap insurance provides new car buyers and leasers with additional coverage
Article Source: Live Insurance News
Author: Colleen Jeremy