Whenever a person buys a car on credit, they need to purchase gap insurance as well. A car purchased from a dealer or other seller, loses value quite fast. After a car has been purchased on credit and the buyer is not yet the full owner, the car is at risk of theft, damage or other hazards.
If such a hazard were to occur to the car, the buyer would still be liable to pay the balance of the car payments. This is where gap insurance comes in. It protects the buyer from having to continue making repayments for the car after it has been stolen, written off or sold to another party.
If a person buys a car and then opts to sell it, the person will be entitled to a refund of their gap insurance. The insurance refund is not usually the full amount paid but part of the amount paid. This amount will depend on several factors. These factors include:
- the time period for loan repayment
- amount of loan that is still pending
- the odometer readings of the car
- few other documents
When selling a car purchased on credit, take it to a dealer. Once the car has been sold off, the dealer will inform the original owner. This information is documented and sent to the insurance company where thegap insurance was purchased. This information, together with documents indicating the sale of the vehicle, odometer readings and others are then processed by the insurance company.
Once the information and the request for a refund are processed, the insurance company will write a cheque for a certain amount, depending on several actors, to the original buyer of the car. The check will then be posted in the mail and the car owner will be able to cash it and recover their gap insurance money.
Gap insurance has several benefits to car buyers. Should a car purchased on credit get written off, the buyer will not have to continue making payments towards that car. Instead this cost will be transferred to the insurance provider.
Again, if the car gets stolen, vandalized or gets damaged such that it cannot be drive, the buyer will also not be expected to make any payments towards the car. Rather, the insurance will cover these costs.
Normal insurance companies and insurance brokers do provide gap insurance to auto buyers across the country.