People buy cars basically as their primary means of transport. A car can be used to commute from home to work, school, college, grocery shopping, the mall as well as plenty of other places. A majority of people buy their car through some form of credit, such as an auto loan or car finance. Only a few pay cash for their auto purchase.
Gap insurance is insurance taken on a car purchased on credit, and the new owner still owes money on the car. When a car is purchased, anything could go wrong. That is a possibility.
For example, the car could get into an accident and be written off, it could get damaged and become unusable or it could even get stolen and never be found.
When such unfortunate incidents occur, the buyer of the car will still be responsible for making the monthly repayments, even though he may never see the car again. This may sound very unfair, but it is the case.
Supposing the car was insured against theft, or may be the car had comprehensive cover. If it gets stolen or totaled, the insurance company will calculate the value of the car based on its current market value. Now, motor vehicles lose value very rapidly.
Just buying a new car and driving it out of the dealership or yard may lose the car up to 25 per cent of its value. This difference will still be footed by the car buyer, even if they had comprehensive insurance.
This is why gap insurance is very important. It covers the buyer of the car whenever one of the unfortunate events occurs. Now, supposing the car buyer decides they want to sell their car, even before they finish paying it off. This can be done, by letting a dealer sell the car and deal with the paperwork. Once the car has been sold, the dealer will inform the car owner.
Gap Insurance Refinance
Whenever a person refinances their car loan, it is important that they read the terms of their contract. If the buyer had a gap insurance policy, it may become void upon refinance. However, this is not always the case. It is important to ensure that adequate information is available, rather than make assumptions.
Contact the dealer, and the insurance provider. In most cases though, this fact would be clearly spelled out. It is imperative that a car buyer who undertakes refinancing talk to their dealer and their insurance provider to clarify the position of their gap insurance.