Many people ask why GAP insurance is considered as your personal safety belt in financial matters. Consider this, such insurance prevents you from financial problems in case your vehicle meets an accident. Just imagine that you are in this scenario: you have just bought a car of late model with the usual car insurance a few months back through a car loan. The car has a £30,000 price tag and you are required to pay £900 every month. Then, an electric post suddenly drops and totally flattens your car. Prior to the time of the accident, you have already paid for three months. (more…)
Archive for July, 2009
GAP Insurance – Secure Your Vehicle Investments
Friday, July 31st, 2009
How Does GAP Insurance Affect My Car Loan?
Saturday, July 4th, 2009GAP (Guaranteed Auto Insurance) is an insurance that will give the insurer a piece of mind. This is because a GAP insurance covers the difference between the worth of the car and the money you still owe on the car. This insurance is especially important in cases where you are still paying for your car and it is stolen or damaged beyond repair or the car’s repair would cost more than its worth.
Remember that unless you have paid in full the car you purchased, it technically and legally still belongs to the manufacturer or that bank which financed it. Therefore, you are responsible for it if something happens to it. Or simply, even if the car is stolen or is rendered unusable, you would still need to pay its amortization. Therefore, so as not to make it hard on yourself and feel bad about paying monthly for something that is no longer existing or usable, then you would definitely want to get a GAP insurance policy. As the name of this insurance suggests, it will pay for the “GAP” between the amount still unpaid to the leasing institution and the amount of the car if totaled or stolen.
For a more vivid illustration, let us take for example that you bought a car for £20,000. Payments are at £400 per month at an interest rate of 5%. Then all of a sudden, the car was hit by a truck that lost its breaks and was totally wrecked. You will of course be calling your regular car insurance company. However, since time passed since the car was bought, the auto insurance decides that the price of the car at that time is only at £15,000 and will only be covering that amount. This will make you face the fact that your car has already depreciated 25% and you will have to shell out £5,000 worth for the car. This will not happen if you have a GAP insurance. This insurance will be the one to cover the GAP, meaning it will be paying for the lacking £5,000 for repair or replacement of the vehicle. (more…)