Realizing that one’s car has been stolen or is a total loss following a collision can be devastating on its own.
“What can be even more disheartening is when it is learned that more is owed to the lender on the vehicle than what insurance will provide as reimbursement,” said Lee Rogers of Florida Insurance in Orlando. “There is where car gap insurance can come in handy.”
What is Car Gap Insurance?
Car gap insurance is one of the many “extras” in automobile insurance that is not required by the state. As the name implies, cap gap insurance covers the difference between what standard insurance will pay when an automobile is lost or damaged beyond repair, and what is owed to the lender.
This type of insurance coverage is typically most beneficial for those leasing vehicles, those who have put down a low down payment when buying a car and for those with vehicles that have particularly high depreciation rates.
Here’s a hypothetical situation for how car gap insurance would come in handy. Say a new car is purchased for $30,000 and then 12 months later is totaled in an accident. Due to depreciation, traditional insurance says the vehicle is only worth $23,000. Depending what the down payment was, the purchaser could find themselves on the hook for several thousand dollars unless they have car gap insurance.
“Depreciation of a new vehicle is particularly important to keep in mind when considering insurance coverage,” Rogers said. “Most new vehicles lose up to 20 percent of their value 12 months after being driven off the lot.”
It is always better to purchase gap insurance sooner than later, but many car insurance companies allow policyholders to purchase gap coverage in the months following the purchase of a new vehicle.
There can be a cap on the amount of coverage that insurance companies will pay out in gap coverage.
The cost of gap coverage depends on the particular insurance provider but some calculate it as a single-digit percentage of a given premium.
Car gap insurance cannot only bring peace of a mind to a policy-holder but it can save thousands in out-of-pocket costs should a vehicle be totaled or stolen.
To learn more call 1.888.525.2210 visit http://www.floridainsurance.com
