What To Consider For Availing Gap Insurance?

Gap insurance may be termed as the coverage of gap between the payment issued by the insurance company and the amount of money owned by you on your car loan if it involves total loss. Availing gap insurance for cars is of great significance. It may be noted that the price paid by you for buying the car is much greater as compared to its resale value. Lots of additional costs including tile fees, sales taxes and registration etc are also added when the cars are got financed.

Those thinking to avail gap insurance may consider the following aspects:

1. Avoid purchasing from dealers – Gap insurance can be purchased from independent insurance agent, finance company or the car dealership agencies. It is suggested that gap insurance is not purchased directly from the dealers from where the car is purchased. The rates quoted by them may be much higher. Purchasing gap insurance quote from insurance agent or independent insurance agent is wise. Naturally, you would like to avail the gap insurance soon after securing the loan. But you may save a considerable amount by delaying the purchase.
2. Getting refund – It may be noted that gap insurance coverage is meant only for the period of your loan. This particular coverage is not required once you pay off your loan. The premium for gap insurance is generally paid up front or is financed into the loan. Selling or refinancing the car before the expiry of the term of the loan entitles you for a refund. The amount of refund should be disbursed soon after the insurance provider is informed of the refinance or sale. But many a times the dealers may cause unnecessary delay in issuing the refund amounts or may not do so without receiving the reminder.
3. Financing the car with higher depreciation may require gap insurance cover.
4. Gap insurance for cars may be beneficial for the vehicles that are financed for more than four years.
5. Leasing a vehicle may also require gap insurance cover.

When not to buy gap insurance – Though gap insurance for cars is beneficial but it is wise not to buy the same in the following situations:

• The value of many cars may be much higher than their loan amount and the total loss payout by the insurance company may exceed the loan amount. Such situations do not require gap insurance cover.
• You do not require buying gap insurance if you are able to continue to make loan payments in the event of total loss.
• There is no need to buy gap insurance when in the event of a total loss you do not need to replace your vehicle.
• No need for buying gap insurance if your loan is for a short period, say six months or a year.
• Gap insurance cover is not needed when you are sure that the loan-to-value amount will not leave the buyers with an upside down car loan if there is total loss.

Those thinking to avail of the gap insurance for cars must consider the above aspects.